UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05398
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Joseph J. Mantineo
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant’s telephone number, including area code: (800) 221-5672
Date of fiscal year end: December 31, 2014
Date of reporting period: December 31, 2014
ITEM 1. REPORTS TO STOCKHOLDERS.
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | BALANCED WEALTH STRATEGY PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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BALANCED WEALTH STRATEGY | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Balanced Wealth Strategy Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to maximize total return consistent with the determination of reasonable risk as determined by AllianceBernstein L.P. (the “Adviser”). The Portfolio invests in a portfolio of equity and debt securities that is designed as a solution for investors who seek a moderate tilt toward equity returns but also want the risk diversification offered by debt securities and the broad diversification of their equity risk across styles, capitalization ranges and geographic regions. The Portfolio targets a weighting of 60% equity securities and 40% debt securities with a goal of providing moderate upside potential without excessive volatility. In managing the Portfolio, the Adviser efficiently diversifies between the debt and equity components to produce the desired risk/return profile. Investments in real estate investment trusts, or REITs, are deemed to be 50% equity and 50% fixed-income for purposes of the overall target blend of the Portfolio.
The Portfolio’s equity component is diversified between growth and value equity investment styles, and between U.S. and non-U.S. markets. The Adviser’s targeted blend for the non-REIT portion of the Portfolio’s equity component is an equal weighting of growth and value stocks (50% each). In addition to blending growth and value styles, the Adviser blends each style-based portion of the Portfolio’s equity component across U.S. and non-U.S. issuers and various capitalization ranges. Within each of the value and growth portions of the Portfolio, the Adviser normally targets a blend of approximately 70% in equities of U.S. companies and the remaining 30% in equities of companies outside the United States. The Adviser will allow the relative weightings of the Portfolio’s investments in equity and debt, growth and value, and U.S. and non-U.S. components to vary in response to market conditions, but ordinarily, only by ±5% of the Portfolio’s net assets. Beyond those ranges, the Adviser will rebalance the Portfolio toward the targeted blend. However, under extraordinary circumstances, such as when market conditions favoring one investment style are compelling, the range may expand to ±10% of the Portfolio’s net assets. The Portfolio’s targeted blend may change from time to time without notice to shareholders based on the Adviser’s assessment of underlying market conditions.
The Portfolio’s debt securities will primarily be investment-grade debt securities, but are expected to include lower-rated securities (“junk bonds”) and preferred stock. The Portfolio will not invest more than 25% of its total assets in securities rated, at the time of purchase, below investment grade.
The Portfolio also may enter into forward commitments, make short sales of securities or maintain a short position and invest in rights or warrants.
Currencies can have a dramatic impact on equity returns, significantly adding to returns in some years and greatly diminishing them in others. Currency and equity positions are evaluated separately. The Adviser may seek to hedge the currency exposure resulting from securities positions when it finds the currency exposure unattractive. To hedge all or a portion of its currency risk, the Portfolio may, from time to time, invest in currency-related derivatives, including forward currency exchange contracts, futures, options on futures, swaps and options. The Adviser may also seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives. The Portfolio may enter into other derivatives transactions, such as options, futures contracts, forwards and swaps.
INVESTMENT RESULTS
The table on page 5 shows the Portfolio’s performance compared to its primary benchmark, the Standard & Poor’s (“S&P”) 500 Index, its secondary benchmark, the Barclays U.S. Aggregate Bond Index and its blended benchmark, the 60% / 40% blend of the S&P 500 Index and the Barclays U.S. Aggregate Bond Index, respectively, for the one-, five- and 10-year periods ended December 31, 2014.
For the annual period, all share classes of the Portfolio underperformed the primary and blended benchmarks, and outperformed the secondary benchmark. The Portfolio’s U.S. growth and U.S. value holdings contributed, helped by the strong performance of U.S. equities in 2014. Conversely, non-U.S. value and non-U.S. growth holdings detracted, hurt by geopolitical concerns, the strong return of the U.S. dollar and the declining price of oil. Fixed-income holdings contributed to relative performance, as did REITs.
The Portfolio utilized derivatives, including futures, credit default swaps and interest rate swaps, for hedging and investment purposes, which had no material impact on performance. Currencies were utilized for hedging purposes and had no material impact on performance.
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| | AllianceBernstein Variable Products Series Fund |
MARKET REVIEW AND INVESTMENT STRATEGY
U.S. large-cap stocks led the gains in 2014 as a resilient economic recovery fueled earnings growth. Emerging markets trailed developed markets, and investors favored defensive stocks, while resources stocks fell as plunging oil prices dragged down shares of energy companies. Bond markets turned more volatile as growth trends and monetary policies in the world’s largest economies headed in different directions. Despite the best efforts of policymakers, inflation continued to fall throughout the developed world, reaching especially worrisome levels in Europe and Japan. Global economic growth continued at a slow and uneven pace. In the U.S., manufacturing indicators rose, and unemployment fell from 6.6% at the beginning of the year to 5.8% in November, bolstering consumer confidence and increasing the chances of a Fed rate hike in 2015 by the U.S. Federal Reserve.
The Portfolio is well positioned to invest opportunistically across a wide range of asset classes and market circumstances. In equities, the Multi-Assets Solutions Team (the “Team”) is confident that its continued focus on companies with strong fundamentals will enable the Team to navigate current market conditions and, more importantly, to construct portfolios that outperform as macroeconomic conditions improve. Meanwhile, in fixed-income, the Team continues to emphasize corporate bonds and commercial mortgage-backed securities over U.S. Treasuries.
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BALANCED WEALTH STRATEGY PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged S&P® 500 Index and the unmanaged Barclays U.S. Aggregate Bond Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The S&P 500 Index includes 500 U.S. stocks and is a common representation of the performance of the overall U.S. stock market. The Barclays U.S. Aggregate Bond Index represents the performance of securities within the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, asset-backed securities, and commercial mortgage backed securities. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates-rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Security Risk: Investments in fixed-income securities with lower ratings (“junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, interest rate sensitivity, negative perceptions of the junk bond market generally and less secondary market liquidity.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Allocation Risk: The allocation of investments among the different investment styles, such as growth or value, equity or debt securities, or U.S. or non-U.S. securities may have a more significant effect on the Portfolio’s net asset value (“NAV”) when one of these investment strategies is performing more poorly than others.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Real Estate Risk: The Portfolio’s investments in the real estate market have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in REITs may have additional risks. REITs are dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in tax laws.
(Disclosures, Risks and Note about Historical Performance continued on next page)
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BALANCED WEALTH STRATEGY PORTFOLIO |
DISCLOSURESAND RISKS | | |
(continued from previous page) | | AllianceBernstein Variable Products Series Fund |
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
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BALANCED WEALTH STRATEGY PORTFOLIO |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
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THE PORTFOLIO VS. ITS BENCHMARKS | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Balanced Wealth Strategy Portfolio Class A† | | | 7.37% | | | | 8.85% | | | | 5.59% | |
Balanced Wealth Strategy Portfolio Class B† | | | 7.11% | | | | 8.59% | | | | 5.33% | |
Primary Benchmark: S&P 500 Index | | | 13.69% | | | | 15.45% | | | | 7.67% | |
Secondary Benchmark: Barclays U.S. Aggregate Bond Index | | | 5.97% | | | | 4.45% | | | | 4.71% | |
Blended Benchmark: 60% S&P 500 Index / 40% Barclays U.S. Aggregate Bond Index | | | 10.62% | | | | 11.18% | | | | 6.77% | |
* Average annual returns. | | | | | | | | | | | | |
† Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014, by 0.01%. | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.65% and 0.90% for Class A and Class B shares, respectively, gross of any fee waivers or expense reimbursements. These waivers/ reimbursements extend through the Portfolio’s current fiscal year and may be extended by the Adviser for additional one-year terms.
BALANCED WEALTH STRATEGY PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT
12/21/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in the Balanced Wealth Strategy Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s primary, secondary and blended benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 3-4.
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BALANCED WEALTH STRATEGY PORTFOLIO |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,013.40 | | | $ | 3.65 | | | | 0.72 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.58 | | | $ | 3.67 | | | | 0.72 | % |
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Class B | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,012.50 | | | $ | 4.92 | | | | 0.97 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.32 | | | $ | 4.94 | | | | 0.97 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
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BALANCED WEALTH STRATEGY PORTFOLIO |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
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COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
U.S. Treasury Bonds & Notes | | $ | 22,357,833 | | | | 6.1 | % |
Federal National Mortgage Association | | | 20,633,625 | | | | 5.7 | |
Apple, Inc. | | | 4,176,779 | | | | 1.2 | |
Inflation-Linked Securities | | | 4,095,017 | | | | 1.1 | |
CVS Health Corp. | | | 3,443,082 | | | | 1.0 | |
UnitedHealth Group, Inc. | | | 2,701,226 | | | | 0.7 | |
Visa, Inc.—Class A | | | 2,687,550 | | | | 0.7 | |
Google, Inc. | | | 2,621,424 | | | | 0.7 | |
Gilead Sciences, Inc. | | | 2,604,404 | | | | 0.7 | |
Comcast Corp. | | | 2,561,421 | | | | 0.7 | |
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| | $ | 67,882,361 | | | | 18.6 | % |
SECURITY TYPE BREAKDOWN†
December 31, 2014 (unaudited)
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SECURITY TYPE | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Common Stocks | | $ | 230,223,280 | | | | 60.9 | % |
Corporates—Investment Grades | | | 32,511,189 | | | | 8.6 | |
Governments—Treasuries | | | 23,950,984 | | | | 6.3 | |
Mortgage Pass-Throughs | | | 23,074,342 | | | | 6.1 | |
Asset-Backed Securities | | | 18,379,019 | | | | 4.9 | |
Commercial Mortgage-Backed Securities | | | 12,510,137 | | | | 3.3 | |
Corporates—Non-Investment Grades | | | 5,484,568 | | | | 1.5 | |
Inflation-Linked Securities | | | 4,095,017 | | | | 1.1 | |
Collateralized Mortgage Obligations | | | 4,019,176 | | | | 1.1 | |
Quasi-Sovereigns | | | 2,160,770 | | | | 0.6 | |
Governments—Sovereign Agencies | | | 536,070 | | | | 0.1 | |
Local Governments—Municipal Bonds | | | 529,575 | | | | 0.1 | |
Emerging Markets—Corporate Bonds | | | 406,450 | | | | 0.1 | |
Preferred Stocks | | | 169,711 | | | | 0.1 | |
Short-Term Investments | | | 19,799,895 | | | | 5.2 | |
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Total Investments | | $ | 377,850,183 | | | | 100.0 | % |
† | | The Portfolio’s security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). |
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BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
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Company | | Shares | | | U.S. $ Value | |
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COMMON STOCKS–63.0% | | | | | | | | |
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FINANCIALS–10.0% | | | | | | | | |
BANKS–3.2% | | | | | | | | |
Bank Hapoalim BM | | | 29,100 | | | $ | 136,832 | |
Bank of America Corp. | | | 118,300 | | | | 2,116,387 | |
Bank of Baroda | | | 6,420 | | | | 109,748 | |
Bank of China Ltd.–Class H | | | 334,000 | | | | 187,464 | |
Bank of Queensland Ltd. | | | 20,940 | | | | 206,299 | |
Citigroup, Inc. | | | 9,900 | | | | 535,689 | |
Comerica, Inc. | | | 9,600 | | | | 449,664 | |
Commerzbank AG(a) | | | 15,500 | | | | 203,307 | |
Danske Bank A/S | | | 15,960 | | | | 431,492 | |
Fifth Third Bancorp | | | 13,200 | | | | 268,950 | |
HSBC Holdings PLC | | | 68,170 | | | | 644,190 | |
ICICI Bank Ltd. | | | 23,100 | | | | 128,241 | |
ING Groep NV(a) | | | 24,680 | | | | 318,857 | |
Intesa Sanpaolo SpA | | | 78,950 | | | | 229,026 | |
Itausa-Investimentos Itau SA (Preference Shares) | | | 25,500 | | | | 90,078 | |
JPMorgan Chase & Co. | | | 24,300 | | | | 1,520,694 | |
KeyCorp | | | 5,836 | | | | 81,120 | |
Mitsubishi UFJ Financial Group, Inc. | | | 69,100 | | | | 379,651 | |
PNC Financial Services Group, Inc. (The) | | | 3,700 | | | | 337,551 | |
Shinhan Financial Group Co., Ltd.(a) | | | 2,130 | | | | 85,616 | |
Societe Generale SA | | | 9,762 | | | | 408,541 | |
Sumitomo Mitsui Financial Group, Inc. | | | 7,300 | | | | 263,915 | |
UniCredit SpA | | | 82,770 | | | | 530,192 | |
Wells Fargo & Co. | | | 37,200 | | | | 2,039,304 | |
| | | | | | | | |
| | | | | | | 11,702,808 | |
| | | | | | | | |
CAPITAL MARKETS–1.6% | | | | | | | | |
Affiliated Managers Group, Inc.(a) | | | 4,842 | | | | 1,027,666 | |
Bank of New York Mellon Corp. (The) | | | 8,000 | | | | 324,560 | |
BlackRock, Inc.–Class A | | | 3,120 | | | | 1,115,587 | |
Daiwa Securities Group, Inc. | | | 117,000 | | | | 916,126 | |
Goldman Sachs Group, Inc. (The) | | | 2,374 | | | | 460,152 | |
Morgan Stanley | | | 10,587 | | | | 410,776 | |
Partners Group Holding AG | | | 760 | | | | 221,112 | |
State Street Corp. | | | 4,100 | | | | 321,850 | |
UBS Group AG(a) | | | 64,842 | | | | 1,114,615 | |
| | | | | | | | |
| | | | | | | 5,912,444 | |
| | | | | | | | |
CONSUMER FINANCE–0.8% | | | | | | | | |
Capital One Financial Corp. | | | 16,800 | | | | 1,386,840 | |
Discover Financial Services | | | 13,500 | | | | 884,115 | |
Muthoot Finance Ltd. | | | 39,211 | | | | 118,958 | |
Shriram Transport Finance Co., Ltd. | | | 2,305 | | | | 40,207 | |
SLM Corp. | | | 58,900 | | | | 600,191 | |
| | | | | | | | |
| | | | | | | 3,030,311 | |
| | | | | | | | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–0.8% | | | | | | | | |
Berkshire Hathaway, Inc.– Class B(a) | | | 5,300 | | | $ | 795,795 | |
Cerved Information Solutions SpA(a)(b) | | | 14,060 | | | | 74,250 | |
Challenger Ltd./Australia | | | 38,980 | | | | 205,913 | |
Friends Life Group Ltd. | | | 36,030 | | | | 204,623 | |
Intercontinental Exchange, Inc. | | | 5,053 | | | | 1,108,073 | |
ORIX Corp. | | | 40,600 | | | | 510,861 | |
| | | | | | | | |
| | | | | | | 2,899,515 | |
| | | | | | | | |
INSURANCE–2.9% | | | | | | | | |
ACE Ltd. | | | 2,100 | | | | 241,248 | |
Admiral Group PLC | | | 34,790 | | | | 713,720 | |
AIA Group Ltd. | | | 227,600 | | | | 1,250,956 | |
Allstate Corp. (The) | | | 19,600 | | | | 1,376,900 | |
American Financial Group, Inc./OH | | | 11,700 | | | | 710,424 | |
American International Group, Inc. | | | 20,200 | | | | 1,131,402 | |
Aon PLC | | | 9,440 | | | | 895,195 | |
Aspen Insurance Holdings Ltd. | | | 4,700 | | | | 205,719 | |
Assurant, Inc. | | | 3,028 | | | | 207,206 | |
Chubb Corp. (The) | | | 3,418 | | | | 353,661 | |
Direct Line Insurance Group PLC | | | 32,790 | | | | 148,329 | |
Hanover Insurance Group, Inc. (The) | | | 5,700 | | | | 406,524 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen | | | 3,190 | | | | 635,248 | |
PartnerRe Ltd. | | | 6,602 | | | | 753,486 | |
Progressive Corp. (The) | | | 4,200 | | | | 113,358 | |
Prudential PLC | | | 34,820 | | | | 805,020 | |
Suncorp Group Ltd. | | | 11,430 | | | | 130,574 | |
Travelers Cos., Inc. (The) | | | 3,700 | | | | 391,645 | |
Unum Group | | | 2,300 | | | | 80,224 | |
XL Group PLC | | | 3,000 | | | | 103,110 | |
| | | | | | | | |
| | | | | | | 10,653,949 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–0.5% | | | | | | | | |
Ayala Land, Inc. | | | 21,100 | | | | 15,734 | |
Daito Trust Construction Co., Ltd. | | | 7,200 | | | | 816,752 | |
Global Logistic Properties Ltd. | | | 439,000 | | | | 818,472 | |
| | | | | | | | |
| | | | | | | 1,650,958 | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–0.2% | | | | | | | | |
Housing Development Finance Corp. Ltd. | | | 26,340 | | | | 471,111 | |
LIC Housing Finance Ltd. | | | 17,210 | | | | 118,293 | |
| | | | | | | | |
| | | | | | | 589,404 | |
| | | | | | | | |
| | | | | | | 36,439,389 | |
| | | | | | | | |
8
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
CONSUMER DISCRETIONARY–9.0% | | | | | | | | |
AUTO COMPONENTS–0.9% | | | | | | | | |
Aisin Seiki Co., Ltd. | | | 8,700 | | | $ | 312,577 | |
Bridgestone Corp. | | | 6,300 | | | | 218,496 | |
Cie Generale des Etablissements Michelin–Class B | | | 4,520 | | | | 408,006 | |
GKN PLC | | | 35,560 | | | | 189,277 | |
Lear Corp. | | | 5,200 | | | | 510,016 | |
Magna International, Inc. (New York)–Class A | | | 4,600 | | | | 499,974 | |
Plastic Omnium SA | | | 6,870 | | | | 186,437 | |
Sumitomo Electric Industries Ltd. | | | 27,200 | | | | 339,708 | |
Valeo SA | | | 3,680 | | | | 457,903 | |
| | | | | | | | |
| | | | | | | 3,122,394 | |
| | | | | | | | |
AUTOMOBILES–1.0% | | | | | | | | |
Bayerische Motoren Werke AG | | | 2,060 | | | | 222,312 | |
Ford Motor Co. | | | 77,600 | | | | 1,202,800 | |
Great Wall Motor Co., Ltd.–Class H | | | 38,500 | | | | 218,515 | |
Honda Motor Co., Ltd. | | | 18,000 | | | | 528,089 | |
Renault SA | | | 2,030 | | | | 147,858 | |
Tata Motors Ltd. | | | 17,050 | | | | 133,307 | |
Toyota Motor Corp. | | | 16,100 | | | | 1,003,309 | |
Volkswagen AG (Preference Shares) | | | 900 | | | | 200,030 | |
| | | | | | | | |
| | | | | | | 3,656,220 | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–0.2% | | | | | | | | |
Estacio Participacoes SA | | | 37,100 | | | | 332,451 | |
Kroton Educacional SA | | | 43,600 | | | | 254,232 | |
TAL Education Group (ADR)(a) | | | 1,900 | | | | 53,371 | |
| | | | | | | | |
| | | | | | | 640,054 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–0.9% | | | | | | | | |
Galaxy Entertainment Group Ltd. | | | 13,000 | | | | 72,237 | |
Melco International Development Ltd.(b) | | | 113,000 | | | | 247,660 | |
Merlin Entertainments PLC(c) | | | 64,969 | | | | 402,005 | |
Sands China Ltd. | | | 18,000 | | | | 87,741 | |
Sodexo SA | | | 5,229 | | | | 511,837 | |
Starbucks Corp. | | | 20,550 | | | | 1,686,127 | |
Yum! Brands, Inc. | | | 2,150 | | | | 156,628 | |
| | | | | | | | |
| | | | | | | 3,164,235 | |
| | | | | | | | |
HOUSEHOLD DURABLES–0.1% | | | | | | | | |
PulteGroup, Inc. | | | 20,806 | | | | 446,497 | |
| | | | | | | | |
INTERNET & CATALOG RETAIL–0.6% | | | | | | | | |
Just Eat PLC(a) | | | 51,305 | | | | 247,649 | |
Priceline Group, Inc. (The)(a) | | | 1,690 | | | | 1,926,955 | |
| | | | | | | | |
| | | | | | | 2,174,604 | |
| | | | | | | | |
| | | | | | | | |
LEISURE PRODUCTS–0.3% | | | | | | | | |
Polaris Industries, Inc. | | | 6,690 | | | $ | 1,011,796 | |
| | | | | | | | |
MEDIA–1.8% | | | | | | | | |
Comcast Corp.–Class A | | | 35,350 | | | | 2,050,654 | |
CTS Eventim AG & Co. KGaA | | | 2,450 | | | | 72,181 | |
Liberty Global PLC–Class A(a) | | | 899 | | | | 45,134 | |
Liberty Global PLC–Series C(a) | | | 28,318 | | | | 1,368,043 | |
Naspers Ltd.–Class N | | | 3,700 | | | | 478,614 | |
Smiles SA | | | 5,700 | | | | 98,745 | |
Thomson Reuters Corp. | | | 2,453 | | | | 98,954 | |
Time Warner, Inc. | | | 14,665 | | | | 1,252,684 | |
Walt Disney Co. (The) | | | 13,448 | | | | 1,266,667 | |
| | | | | | | | |
| | | | | | | 6,731,676 | |
| | | | | | | | |
MULTILINE RETAIL–0.5% | | | | | | | | |
B&M European Value Retail SA | | | 139,637 | | | | 620,269 | |
Dillard’s, Inc.–Class A | | | 3,000 | | | | 375,540 | |
Dollar General Corp.(a) | | | 10,300 | | | | 728,210 | |
Poundland Group PLC(a) | | | 59,110 | | | | 302,367 | |
| | | | | | | | |
| | | | | | | 2,026,386 | |
| | | | | | | | |
SPECIALTY RETAIL–1.7% | | | | | | | | |
Foot Locker, Inc. | | | 14,078 | | | | 790,902 | |
GameStop Corp.–Class A(b) | | | 17,900 | | | | 605,020 | |
Home Depot, Inc. (The) | | | 19,330 | | | | 2,029,070 | |
Kingfisher PLC | | | 29,490 | | | | 155,888 | |
L’Occitane International SA | | | 3,500 | | | | 8,846 | |
O’Reilly Automotive, Inc.(a) | | | 2,900 | | | | 558,598 | |
Office Depot, Inc.(a) | | | 73,337 | | | | 628,865 | |
Shimamura Co., Ltd. | | | 1,700 | | | | 146,705 | |
Sports Direct International PLC(a) | | | 51,549 | | | | 567,076 | |
Ulta Salon Cosmetics & Fragrance, Inc.(a) | | | 5,370 | | | | 686,501 | |
Yamada Denki Co., Ltd.(b) | | | 68,600 | | | | 230,161 | |
| | | | | | | | |
| | | | | | | 6,407,632 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–1.0% | | | | | | | | |
Cie Financiere Richemont SA | | | 11,400 | | | | 1,010,708 | |
Global Brands Group Holding Ltd.(a) | | | 600,000 | | | | 117,163 | |
HUGO BOSS AG | | | 2,956 | | | | 361,612 | |
Kering | | | 590 | | | | 113,381 | |
NIKE, Inc.–Class B | | | 14,471 | | | | 1,391,387 | |
Samsonite International SA | | | 147,900 | | | | 438,293 | |
Titan Co., Ltd. | | | 14,370 | | | | 86,562 | |
| | | | | | | | |
| | | | | | | 3,519,106 | |
| | | | | | | | |
| | | | | | | 32,900,600 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–8.8% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.7% | | | | | | | | |
Brocade Communications Systems, Inc. | | | 64,600 | | | | 764,864 | |
Cisco Systems, Inc. | | | 32,740 | | | | 910,663 | |
9
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
F5 Networks, Inc.(a) | | | 4,310 | | | $ | 562,304 | |
Harris Corp. | | | 5,601 | | | | 402,264 | |
| | | | | | | | |
| | | | | | | 2,640,095 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.3% | | | | | | | | |
Amphenol Corp–Class A | | | 16,231 | | | | 873,390 | |
Arrow Electronics, Inc.(a) | | | 4,300 | | | | 248,927 | |
| | | | | | | | |
| | | | | | | 1,122,317 | |
| | | | | | | | |
INTERNET SOFTWARE & SERVICES–1.6% | | | | | | | | |
Baidu, Inc. (Sponsored ADR)(a) | | | 1,920 | | | | 437,702 | |
Facebook, Inc.–Class A(a) | | | 22,334 | | | | 1,742,499 | |
Google, Inc.–Class A(a) | | | 2,460 | | | | 1,305,424 | |
Google, Inc.–Class C(a) | | | 2,500 | | | | 1,316,000 | |
LinkedIn Corp.–Class A(a) | | | 2,330 | | | | 535,224 | |
Telecity Group PLC | | | 45,783 | | | | 571,820 | |
| | | | | | | | |
| | | | | | | 5,908,669 | |
| | | | | | | | |
IT SERVICES–1.2% | | | | | | | | |
Booz Allen Hamilton Holding Corp. | | | 8,600 | | | | 228,158 | |
Cap Gemini SA | | | 2,270 | | | | 162,344 | |
HCL Technologies Ltd. | | | 1,840 | | | | 46,677 | |
Tata Consultancy Services Ltd. | | | 4,340 | | | | 176,288 | |
Visa, Inc.–Class A | | | 10,250 | | | | 2,687,550 | |
Xerox Corp. | | | 67,600 | | | | 936,936 | |
| | | | | | | | |
| | | | | | | 4,237,953 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–1.4% | | | | | | | | |
Advanced Semiconductor Engineering, Inc. | | | 131,000 | | | | 155,579 | |
Altera Corp. | | | 17,410 | | | | 643,125 | |
Applied Materials, Inc. | | | 23,664 | | | | 589,707 | |
ASM International NV | | | 4,020 | | | | 170,242 | |
Infineon Technologies AG | | | 11,794 | | | | 124,802 | |
Intel Corp. | | | 31,800 | | | | 1,154,022 | |
Linear Technology Corp. | | | 12,850 | | | | 585,960 | |
Micron Technology, Inc.(a) | | | 8,300 | | | | 290,583 | |
Novatek Microelectronics Corp. | | | 37,000 | | | | 206,760 | |
NXP Semiconductors NV(a) | | | 8,486 | | | | 648,330 | |
Sumco Corp.(b) | | | 18,500 | | | | 264,848 | |
Tokyo Electron Ltd. | | | 2,600 | | | | 197,159 | |
| | | | | | | | |
| | | | | | | 5,031,117 | |
| | | | | | | | |
SOFTWARE–1.7% | | | | | | | | |
ANSYS, Inc.(a) | | | 15,835 | | | | 1,298,470 | |
Aspen Technology, Inc.(a) | | | 12,230 | | | | 428,295 | |
Dassault Systemes | | | 6,673 | | | | 406,922 | |
Electronic Arts, Inc.(a) | | | 15,538 | | | | 730,519 | |
Microsoft Corp. | | | 34,300 | | | | 1,593,235 | |
Mobileye NV(a) | | | 6,120 | | | | 248,227 | |
NetSuite, Inc.(a) | | | 5,020 | | | | 548,033 | |
Oracle Corp. | | | 11,712 | | | | 526,689 | |
ServiceNow, Inc.(a) | | | 8,065 | | | | 547,210 | |
| | | | | | | | |
| | | | | | | 6,327,600 | |
| | | | | | | | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–0.1% | | | | | | | | |
Samsung Electronics Co., Ltd. | | | 320 | | | $ | 384,718 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–1.8% | | | | | | | | |
Apple, Inc. | | | 37,840 | | | | 4,176,779 | |
Asustek Computer, Inc. | | | 16,000 | | | | 174,576 | |
Casetek Holdings Ltd. | | | 32,000 | | | | 180,192 | |
Catcher Technology Co., Ltd. | | | 33,000 | | | | 254,840 | |
Hewlett-Packard Co. | | | 43,000 | | | | 1,725,590 | |
| | | | | | | | |
| | | | | | | 6,511,977 | |
| | | | | | | | |
| | | | | | | 32,164,446 | |
| | | | | | | | |
HEALTH CARE–7.4% | | | | | | | | |
BIOTECHNOLOGY–1.4% | | | | | | | | |
Actelion Ltd. (REG)(a) | | | 5,070 | | | | 583,664 | |
Biogen Idec, Inc.(a) | | | 5,612 | | | | 1,904,993 | |
Gilead Sciences, Inc.(a) | | | 27,630 | | | | 2,604,404 | |
| | | | | | | | |
| | | | | | | 5,093,061 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–0.5% | | | | | | | | |
Align Technology, Inc.(a) | | | 7,204 | | | | 402,776 | |
Intuitive Surgical, Inc.(a) | | | 2,600 | | | | 1,375,244 | |
| | | | | | | | |
| | | | | | | 1,778,020 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–1.8% | | | | | | | | |
Aetna, Inc. | | | 11,500 | | | | 1,021,545 | |
Anthem, Inc. | | | 11,700 | | | | 1,470,339 | |
Express Scripts Holding Co.(a) | | | 5,300 | | | | 448,751 | |
McKesson Corp. | | | 3,070 | | | | 637,270 | |
Premier, Inc.–Class A(a) | | | 13,538 | | | | 453,929 | |
UnitedHealth Group, Inc. | | | 26,721 | | | | 2,701,226 | |
| | | | | | | | |
| | | | | | | 6,733,060 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–0.8% | | | | | | | | |
Eurofins Scientific SE | | | 5,059 | | | | 1,291,320 | |
Illumina, Inc.(a) | | | 541 | | | | 99,858 | |
Mettler-Toledo International, Inc.(a) | | | 2,169 | | | | 656,036 | |
Quintiles Transnational Holdings, Inc.(a) | | | 14,843 | | | | 873,807 | |
| | | | | | | | |
| | | | | | | 2,921,021 | |
| | | | | | | | |
PHARMACEUTICALS–2.9% | | | | | | | | |
Allergan, Inc./United States | | | 11,743 | | | | 2,496,444 | |
Astellas Pharma, Inc. | | | 23,400 | | | | 325,777 | |
GlaxoSmithKline PLC | | | 37,120 | | | | 796,358 | |
Indivior PLC(a) | | | 2,780 | | | | 6,473 | |
Johnson & Johnson | | | 18,000 | | | | 1,882,260 | |
Merck & Co., Inc. | | | 18,700 | | | | 1,061,973 | |
Novo Nordisk A/S–Class B | | | 12,820 | | | | 542,283 | |
Pfizer, Inc. | | | 68,600 | | | | 2,136,890 | |
Roche Holding AG | | | 3,040 | | | | 823,664 | |
10
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Sun Pharmaceutical Industries Ltd. | | | 11,420 | | | $ | 149,321 | |
Teva Pharmaceutical Industries Ltd. | | | 2,770 | | | | 158,790 | |
Teva Pharmaceutical Industries Ltd. (Sponsored ADR) | | | 1,570 | | | | 90,291 | |
| | | | | | | | |
| | | | | | | 10,470,524 | |
| | | | | | | | |
| | | | | | | 26,995,686 | |
| | | | | | | | |
INDUSTRIALS–6.2% | | | | | | | | |
AEROSPACE & DEFENSE–1.1% | | | | | | | | |
Airbus Group NV | | | 13,520 | | | | 668,402 | |
Boeing Co. (The) | | | 7,470 | | | | 970,950 | |
General Dynamics Corp. | | | 2,100 | | | | 289,002 | |
L-3 Communications Holdings, Inc. | | | 5,064 | | | | 639,127 | |
Precision Castparts Corp. | | | 2,434 | | | | 586,302 | |
Rockwell Collins, Inc. | | | 2,816 | | | | 237,896 | |
Safran SA | | | 4,340 | | | | 267,756 | |
Zodiac Aerospace | | | 12,989 | | | | 437,311 | |
| | | | | | | | |
| | | | | | | 4,096,746 | |
| | | | | | | | |
AIRLINES–0.5% | | | | | | | | |
Delta Air Lines, Inc. | | | 25,600 | | | | 1,259,264 | |
International Consolidated Airlines Group SA(a) | | | 58,500 | | | | 440,392 | |
Japan Airlines Co., Ltd. | | | 4,000 | | | | 118,596 | |
Qantas Airways Ltd.(a) | | | 127,940 | | | | 248,500 | |
| | | | | | | | |
| | | | | | | 2,066,752 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–0.3% | | | | | | | | |
Babcock International Group PLC | | | 45,125 | | | | 739,250 | |
Edenred | | | 15,104 | | | | 417,716 | |
Regus PLC | | | 26,718 | | | | 86,264 | |
| | | | | | | | |
| | | | | | | 1,243,230 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–0.3% | | | | | | | | |
AMETEK, Inc. | | | 18,892 | | | | 994,286 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–0.9% | | | | | | | | |
Bidvest Group Ltd. (The) | | | 4,750 | | | | 124,183 | |
Danaher Corp. | | | 22,309 | | | | 1,912,105 | |
General Electric Co. | | | 30,300 | | | | 765,681 | |
Hutchison Whampoa Ltd. | | | 18,000 | | | | 205,999 | |
Toshiba Corp. | | | 74,000 | | | | 312,080 | |
| | | | | | | | |
| | | | | | | 3,320,048 | |
| | | | | | | | |
INDUSTRIAL WAREHOUSE DISTRIBUTION–0.5% | | | | | | | | |
DCT Industrial Trust, Inc. | | | 5,480 | | | | 195,417 | |
Granite Real Estate Investment Trust | | | 10,292 | | | | 365,881 | |
Hansteen Holdings PLC | | | 68,120 | | | | 114,241 | |
Japan Logistics Fund, Inc. | | | 57 | | | | 128,200 | |
Mapletree Industrial Trust | | | 159,000 | | | | 177,901 | |
| | | | | | | | |
Mapletree Logistics Trust | | | 231,389 | | | $ | 206,602 | |
Mexico Real Estate Management SA de CV(a) | | | 59,400 | | | | 98,921 | |
Prologis, Inc. | | | 2,153 | | | | 92,643 | |
STAG Industrial, Inc. | | | 16,410 | | | | 402,045 | |
| | | | | | | | |
| | | | | | | 1,781,851 | |
| | | | | | | | |
MACHINERY–1.1% | | | | | | | | |
Caterpillar, Inc. | | | 7,000 | | | | 640,710 | |
ITT Corp. | | | 13,651 | | | | 552,319 | |
JTEKT Corp. | | | 19,000 | | | | 319,766 | |
Pall Corp. | | | 11,620 | | | | 1,176,060 | |
Parker-Hannifin Corp. | | | 1,200 | | | | 154,740 | |
Wabtec Corp./DE | | | 12,930 | | | | 1,123,488 | |
| | | | | | | | |
| | | | | | | 3,967,083 | |
| | | | | | | | |
MARINE–0.1% | | | | | | | | |
AP Moeller-Maersk A/S– Class B | | | 65 | | | | 129,282 | |
Nippon Yusen KK | | | 97,000 | | | | 273,977 | |
| | | | | | | | |
| | | | | | | 403,259 | |
| | | | | | | | |
MIXED OFFICE INDUSTRIAL–0.1% | | | | | | | | |
Goodman Group(b) | | | 56,240 | | | | 259,766 | |
| | | | | | | | |
PROFESSIONAL SERVICES–0.9% | | | | | | | | |
Applus Services SA(a) | | | 19,095 | | | | 210,322 | |
Bureau Veritas SA | | | 37,429 | | | | 829,275 | |
Capita PLC | | | 66,411 | | | | 1,113,559 | |
Intertek Group PLC | | | 23,452 | | | | 848,775 | |
Teleperformance | | | 4,250 | | | | 289,298 | |
| | | | | | | | |
| | | | | | | 3,291,229 | |
| | | | | | | | |
ROAD & RAIL–0.2% | | | | | | | | |
Central Japan Railway Co. | | | 2,000 | | | | 299,752 | |
JB Hunt Transport Services, Inc. | | | 4,527 | | | | 381,400 | |
| | | | | | | | |
| | | | | | | 681,152 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–0.2% | | | | | | | | |
Brenntag AG | | | 5,810 | | | | 324,837 | |
Bunzl PLC | | | 5,720 | | | | 156,369 | |
Rexel SA | | | 8,477 | | | | 151,875 | |
| | | | | | | | |
| | | | | | | 633,081 | |
| | | | | | | | |
| | | | | | | 22,738,483 | |
| | | | | | | | |
CONSUMER STAPLES–4.3% | | | | | | | | |
BEVERAGES–0.6% | | | | | | | | |
Asahi Group Holdings Ltd. | | | 4,100 | | | | 126,843 | |
Molson Coors Brewing Co.– Class B | | | 1,000 | | | | 74,520 | |
Monster Beverage Corp.(a) | | | 20,771 | | | | 2,250,538 | |
| | | | | | | | |
| | | | | | | 2,451,901 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–1.8% | | | | | | | | |
Costco Wholesale Corp. | | | 8,670 | | | | 1,228,972 | |
CVS Health Corp. | | | 35,750 | | | | 3,443,082 | |
11
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Koninklijke Ahold NV | | | 26,435 | | | $ | 469,825 | |
Kroger Co. (The) | | | 12,800 | | | | 821,888 | |
Lenta Ltd. (GDR)(a)(c) | | | 6,510 | | | | 44,008 | |
Olam International Ltd. | | | 179,412 | | | | 272,272 | |
Sugi Holdings Co., Ltd.(b) | | | 2,100 | | | | 85,721 | |
Tsuruha Holdings, Inc. | | | 1,800 | | | | 104,154 | |
| | | | | | | | |
| | | | | | | 6,469,922 | |
| | | | | | | | |
FOOD PRODUCTS–0.6% | | | | | | | | |
Archer-Daniels-Midland Co. | | | 4,200 | | | | 218,400 | |
Bunge Ltd. | | | 1,020 | | | | 92,729 | |
Ingredion, Inc. | | | 6,874 | | | | 583,190 | |
Keurig Green Mountain, Inc. | | | 2,970 | | | | 393,213 | |
Mead Johnson Nutrition Co.–Class A | | | 8,950 | | | | 899,833 | |
| | | | | | | | |
| | | | | | | 2,187,365 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–0.2% | | | | | | | | |
Procter & Gamble Co. (The) | | | 5,000 | | | | 455,450 | |
Reckitt Benckiser Group PLC | | | 2,780 | | | | 225,163 | |
| | | | | | | | |
| | | | | | | 680,613 | |
| | | | | | | | |
PERSONAL PRODUCTS–0.1% | | | | | | | | |
Estee Lauder Cos., Inc. (The)–Class A | | | 5,590 | | | | 425,958 | |
| | | | | | | | |
TOBACCO–1.0% | | | | | | | | |
British American Tobacco PLC | | | 21,389 | | | | 1,159,090 | |
Imperial Tobacco Group PLC | | | 8,140 | | | | 358,319 | |
Philip Morris International, Inc. | | | 25,075 | | | | 2,042,359 | |
| | | | | | | | |
| | | | | | | 3,559,768 | |
| | | | | | | | |
| | | | | | | 15,775,527 | |
| | | | | | | | |
EQUITY: OTHER–3.5% | | | | | | | | |
DIVERSIFIED/ SPECIALTY–2.9% | | | | | | | | |
British Land Co. PLC(The) | | | 46,823 | | | | 564,622 | |
Buzzi Unicem SpA | | | 12,990 | | | | 164,416 | |
CA Immobilien Anlagen AG(a)(b) | | | 15,980 | | | | 298,861 | |
CBRE Group, Inc.–Class A(a) | | | 10,990 | | | | 376,407 | |
Cheung Kong Holdings Ltd. | | | 21,000 | | | | 352,223 | |
ClubCorp Holdings, Inc. | | | 19,904 | | | | 356,879 | |
Cofinimmo SA | | | 2,140 | | | | 248,005 | |
CSR Ltd. | | | 57,960 | | | | 183,121 | |
Duke Realty Corp. | | | 15,080 | | | | 304,616 | |
East Japan Railway Co. | | | 2,500 | | | | 188,427 | |
Fibra Uno Administracion SA de CV | | | 77,830 | | | | 229,474 | |
Folkestone Education Trust | | | 51,780 | | | | 84,124 | |
Fukuoka REIT Corp. | | | 55 | | | | 101,832 | |
GPT Group (The) | | | 28,970 | | | | 102,526 | |
Gramercy Property Trust, Inc. | | | 59,970 | | | | 413,793 | |
Hemfosa Fastigheter AB(a) | | | 14,480 | | | | 305,534 | |
Henderson Land Development Co., Ltd. | | | 18,340 | | | | 127,233 | |
Kennedy Wilson Europe Real Estate PLC | | | 22,084 | | | | 363,133 | |
Kennedy-Wilson Holdings, Inc. | | | 14,040 | | | | 355,212 | |
| | | | | | | | |
Lend Lease Group | | | 26,276 | | | $ | 349,966 | |
Merlin Properties Socimi SA(a) | | | 34,250 | | | | 415,685 | |
Mitsubishi Estate Co., Ltd. | | | 31,000 | | | | 653,197 | |
Mitsui Fudosan Co., Ltd. | | | 21,100 | | | | 565,808 | |
Nomura Real Estate Master Fund, Inc.(b) | | | 87 | | | | 112,665 | |
Orix JREIT, Inc.(b) | | | 189 | | | | 265,788 | |
PLA Administradora Industrial S de RL de CV(a) | | | 71,170 | | | | 149,250 | |
Regal Entertainment Group–Class A | | | 16,800 | | | | 358,848 | |
Royal Mail PLC | | | 53,190 | | | | 354,456 | |
Spirit Realty Capital, Inc. | | | 10,661 | | | | 126,759 | |
Sumitomo Realty & Development Co., Ltd. | | | 17,000 | | | | 579,175 | |
Sun Hung Kai Properties Ltd. | | | 38,600 | | | | 584,807 | |
Taiheiyo Cement Corp. | | | 23,000 | | | | 72,160 | |
Tokyu Fudosan Holdings Corp. | | | 13,700 | | | | 95,055 | |
Top REIT, Inc. | | | 26 | | | | 116,661 | |
Vornado Realty Trust | | | 1,530 | | | | 180,096 | |
Wharf Holdings Ltd. (The) | | | 85,000 | | | | 610,223 | |
| | | | | | | | |
| | | | | | | 10,711,037 | |
| | | | | | | | |
HEALTH CARE–0.6% | | | | | | | | |
Chartwell Retirement Residences | | | 20,060 | | | | 205,642 | |
HCP, Inc. | | | 14,170 | | | | 623,905 | |
LTC Properties, Inc. | | | 10,130 | | | | 437,312 | |
Medical Properties Trust, Inc. | | | 35,175 | | | | 484,711 | |
Ventas, Inc. | | | 5,970 | | | | 428,049 | |
| | | | | | | | |
| | | | | | | 2,179,619 | |
| | | | | | | | |
| | | | | | | 12,890,656 | |
| | | | | | | | |
ENERGY–3.3% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.6% | | | | | | | | |
Aker Solutions ASA(a)(c) | | | 14,840 | | | | 82,544 | |
FMC Technologies, Inc.(a) | | | 18,670 | | | | 874,503 | |
National Oilwell Varco, Inc. | | | 2,700 | | | | 176,931 | |
Schlumberger Ltd. | | | 14,394 | | | | 1,229,391 | |
| | | | | | | | |
| | | | | | | 2,363,369 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–2.7% | | | | | | | | |
BG Group PLC | | | 37,120 | | | | 496,729 | |
Chesapeake Energy Corp. | | | 7,200 | | | | 140,904 | |
Chevron Corp. | | | 10,700 | | | | 1,200,326 | |
Exxon Mobil Corp. | | | 24,000 | | | | 2,218,800 | |
Hess Corp. | | | 14,000 | | | | 1,033,480 | |
JX Holdings, Inc. | | | 112,800 | | | | 438,973 | |
Marathon Petroleum Corp. | | | 6,577 | | | | 593,640 | |
Murphy Oil Corp. | | | 12,167 | | | | 614,677 | |
Occidental Petroleum Corp. | | | 15,000 | | | | 1,209,150 | |
Petroleo Brasileiro SA (Sponsored ADR) | | | 16,210 | | | | 122,872 | |
Royal Dutch Shell PLC (Euronext Amsterdam)–Class A | | | 10,595 | | | | 353,122 | |
Total SA | | | 11,080 | | | | 567,650 | |
12
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Valero Energy Corp. | | | 16,800 | | | $ | 831,600 | |
| | | | | | | | |
| | | | | | | 9,821,923 | |
| | | | | | | | |
| | | | | | | 12,185,292 | |
| | | | | | | | |
RETAIL–2.3% | | | | | | | | |
REGIONAL MALL–0.9% | | | | | | | | |
General Growth Properties, Inc. | | | 14,630 | | | | 411,542 | |
Macerich Co. (The) | | | 8,440 | | | | 703,980 | |
Pennsylvania Real Estate Investment Trust | | | 17,510 | | | | 410,785 | |
Simon Property Group, Inc. | | | 5,616 | | | | 1,022,730 | |
Taubman Centers, Inc. | | | 1,240 | | | | 94,761 | |
Washington Prime Group, Inc. | | | 27,728 | | | | 477,476 | |
Westfield Corp. | | | 33,280 | | | | 243,954 | |
| | | | | | | | |
| | | | | | | 3,365,228 | |
| | | | | | | | |
SHOPPING CENTER/OTHER RETAIL–1.4% | | | | | | | | |
Aeon Mall Co., Ltd. | | | 17,500 | | | | 310,117 | |
Charter Hall Retail REIT | | | 35,870 | | | | 119,986 | |
Citycon OYJ | | | 31,860 | | | | 98,267 | |
DDR Corp. | | | 18,030 | | | | 331,031 | |
Federation Centres | | | 82,840 | | | | 192,873 | |
Hammerson PLC | | | 22,530 | | | | 210,992 | |
Japan Retail Fund Investment Corp. | | | 103 | | | | 217,668 | |
JB Hi-Fi Ltd.(b) | | | 13,790 | | | | 176,969 | |
Klepierre | | | 9,553 | | | | 410,188 | |
Link REIT (The) | | | 16,768 | | | | 104,872 | |
Ramco-Gershenson Properties Trust | | | 22,770 | | | | 426,710 | |
Regency Centers Corp. | | | 2,630 | | | | 167,741 | |
Retail Opportunity Investments Corp. | | | 24,170 | | | | 405,814 | |
RioCan Real Estate Investment Trust (Toronto) | | | 4,973 | | | | 113,132 | |
Scentre Group(a) | | | 188,849 | | | | 535,042 | |
Unibail-Rodamco SE | | | 2,569 | | | | 659,040 | |
Vastned Retail NV | | | 6,634 | | | | 299,971 | |
Weingarten Realty Investors | | | 8,570 | | | | 299,264 | |
| | | | | | | | |
| | | | | | | 5,079,677 | |
| | | | | | | | |
| | | | | | | 8,444,905 | |
| | | | | | | | |
RESIDENTIAL–1.8% | | | | | | | | |
MULTI-FAMILY–1.6% | | | | | | | | |
Associated Estates Realty Corp. | | | 24,750 | | | | 574,447 | |
AvalonBay Communities, Inc. | | | 3,020 | | | | 493,438 | |
Barratt Developments PLC | | | 28,200 | | | | 205,243 | |
China Overseas Land & Investment Ltd. | | | 150,000 | | | | 444,697 | |
China Vanke Co., Ltd.– Class H(a)(b) | | | 127,560 | | | | 282,318 | |
CIFI Holdings Group Co., Ltd. | | | 640,000 | | | | 128,257 | |
Comforia Residential REIT, Inc.(b) | | | 63 | | | | 137,726 | |
Equity Residential | | | 3,560 | | | | 255,750 | |
Essex Property Trust, Inc. | | | 505 | | | | 104,333 | |
Even Construtora e Incorporadora SA | | | 32,100 | | | | 65,692 | |
| | | | | | | | |
GAGFAH SA(a) | | | 20,863 | | | $ | 465,920 | |
Ichigo Real Estate Investment Corp. | | | 158 | | | | 122,897 | |
Irish Residential Properties REIT PLC(a) | | | 81,000 | | | | 103,797 | |
Kaisa Group Holdings Ltd.(b)(d)(e) | | | 409,000 | | | | 83,861 | |
Kenedix Residential Investment Corp. | | | 43 | | | | 129,062 | |
KWG Property Holding Ltd. | | | 239,000 | | | | 162,748 | |
LEG Immobilien AG(a) | | | 4,789 | | | | 356,750 | |
Meritage Homes Corp.(a) | | | 4,920 | | | | 177,071 | |
Mid-America Apartment Communities, Inc. | | | 6,520 | | | | 486,914 | |
Stockland(b) | | | 137,209 | | | | 458,536 | |
Sun Communities, Inc. | | | 5,621 | | | | 339,846 | |
Wing Tai Holdings Ltd. | | | 125,000 | | | | 153,913 | |
| | | | | | | | |
| | | | | | | 5,733,216 | |
| | | | | | | | |
SELF STORAGE–0.1% | | | | | | | | |
Public Storage | | | 500 | | | | 92,425 | |
Safestore Holdings PLC | | | 53,910 | | | | 194,936 | |
| | | | | | | | |
| | | | | | | 287,361 | |
| | | | | | | | |
SINGLE FAMILY–0.1% | | | | | | | | |
Fortune Brands Home & Security, Inc. | | | 7,450 | | | | 337,261 | |
| | | | | | | | |
| | | | | | | 6,357,838 | |
| | | | | | | | |
UTILITIES–1.5% | | | | | | | | |
ELECTRIC UTILITIES–0.8% | | | | | | | | |
American Electric Power Co., Inc. | | | 10,800 | | | | 655,776 | |
Edison International | | | 16,900 | | | | 1,106,612 | |
EDP–Energias de Portugal SA | | | 37,090 | | | | 143,821 | |
Electricite de France SA | | | 9,370 | | | | 257,941 | |
Enel SpA | | | 40,691 | | | | 181,381 | |
Westar Energy, Inc. | | | 10,000 | | | | 412,400 | |
| | | | | | | | |
| | | | | | | 2,757,931 | |
| | | | | | | | |
GAS UTILITIES–0.2% | | | | | | | | |
Atmos Energy Corp. | | | 1,800 | | | | 100,332 | |
UGI Corp. | | | 20,700 | | | | 786,186 | |
| | | | | | | | |
| | | | | | | 886,518 | |
| | | | | | | | |
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS–0.3% | | | | | | | | |
APR Energy PLC | | | 29,787 | | | | 85,944 | |
Calpine Corp.(a) | | | 36,286 | | | | 803,009 | |
NRG Energy, Inc. | | | 9,608 | | | | 258,936 | |
| | | | | | | | |
| | | | | | | 1,147,889 | |
| | | | | | | | |
MULTI-UTILITIES–0.2% | | | | | | | | |
CenterPoint Energy, Inc. | | | 19,800 | | | | 463,914 | |
DTE Energy Co. | | | 1,200 | | | | 103,644 | |
Public Service Enterprise Group, Inc. | | | 3,500 | | | | 144,935 | |
| | | | | | | | |
| | | | | | | 712,493 | |
| | | | | | | | |
| | | | | | | 5,504,831 | |
| | | | | | | | |
13
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MATERIALS–1.5% | | | | | | | | |
CHEMICALS–1.3% | | | | | | | | |
Arkema SA(b) | | | 3,556 | | | $ | 235,183 | |
BASF SE | | | 1,060 | | | | 88,914 | |
CF Industries Holdings, Inc. | | | 425 | | | | 115,829 | |
Chr Hansen Holding A/S | | | 7,710 | | | | 341,579 | |
Denki Kagaku Kogyo KK | | | 45,000 | | | | 164,816 | |
Eastman Chemical Co. | | | 6,319 | | | | 479,359 | |
Essentra PLC | | | 92,674 | | | | 1,050,561 | |
IMCD Group NV(a) | | | 2,670 | | | | 91,110 | |
Incitec Pivot Ltd. | | | 51,516 | | | | 133,257 | |
JSR Corp. | | | 22,300 | | | | 382,763 | |
Koninklijke DSM NV | | | 5,238 | | | | 319,481 | |
LyondellBasell Industries NV–Class A | | | 8,300 | | | | 658,937 | |
Mitsubishi Gas Chemical Co., Inc. | | | 26,000 | | | | 130,491 | |
Monsanto Co. | | | 4,149 | | | | 495,681 | |
| | | | | | | | |
| | | | | | | 4,687,961 | |
| | | | | | | | |
METALS & MINING–0.1% | | | | | | | | |
Alcoa, Inc. | | | 8,700 | | | | 137,373 | |
Dowa Holdings Co., Ltd. | | | 12,000 | | | | 95,340 | |
Rio Tinto PLC | | | 5,900 | | | | 271,973 | |
Tata Steel Ltd. | | | 13,680 | | | | 86,112 | |
| | | | | | | | |
| | | | | | | 590,798 | |
| | | | | | | | |
PAPER & FOREST PRODUCTS–0.1% | | | | | | | | |
Mondi PLC | | | 13,260 | | | | 215,415 | |
| | | | | | | | |
| | | | | | | 5,494,174 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–1.4% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–0.8% | | | | | | | | |
AT&T, Inc. | | | 39,900 | | | | 1,340,241 | |
Bezeq The Israeli Telecommunication Corp., Ltd. | | | 63,518 | | | | 112,669 | |
CenturyLink, Inc. | | | 3,700 | | | | 146,446 | |
Nippon Telegraph & Telephone Corp. | | | 10,200 | | | | 521,043 | |
Telecom Italia SpA (savings shares) | | | 363,220 | | | | 303,668 | |
Telenor ASA | | | 6,620 | | | | 133,913 | |
Vivendi SA(a) | | | 17,484 | | | | 435,186 | |
| | | | | | | | |
| | | | | | | 2,993,166 | |
| | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–0.6% | | | | | | | | |
China Mobile Ltd. | | | 17,000 | | | | 199,557 | |
SoftBank Corp. | | | 11,000 | | | | 654,756 | |
Turkcell Iletisim Hizmetleri AS(a) | | | 21,330 | | | | 130,166 | |
Vodafone Group PLC | | | 155,343 | | | | 532,613 | |
| | | | | | | | |
Vodafone Group PLC (Sponsored ADR) | | | 16,900 | | | $ | 577,473 | |
| | | | | | | | |
| | | | | | | 2,094,565 | |
| | | | | | | | |
| | | | | | | 5,087,731 | |
| | | | | | | | |
OFFICE–1.1% | | | | | | | | |
OFFICE–1.1% | | | | | | | | |
Allied Properties Real Estate Investment Trust | | | 7,776 | | | | 250,588 | |
Boston Properties, Inc. | | | 1,764 | | | | 227,009 | |
Columbia Property Trust, Inc. | | | 14,500 | | | | 367,575 | |
Cousins Properties, Inc. | | | 8,040 | | | | 91,817 | |
Dream Office Real Estate Investment Trust | | | 9,836 | | | | 212,924 | |
Entra ASA(a)(c) | | | 18,146 | | | | 186,256 | |
Fabege AB | | | 21,670 | | | | 278,212 | |
Hongkong Land Holdings Ltd. | | | 70,000 | | | | 471,627 | |
Hudson Pacific Properties, Inc. | | | 6,170 | | | | 185,470 | |
Investa Office Fund | | | 50,000 | | | | 147,611 | |
Japan Excellent, Inc. | | | 186 | | | | 247,975 | |
Japan Real Estate Investment Corp. | | | 51 | | | | 245,732 | |
Kenedix Office Investment Corp.–Class A | | | 59 | | | | 333,949 | |
Kilroy Realty Corp. | | | 1,320 | | | | 91,172 | |
NTT Urban Development Corp. | | | 11,000 | | | | 110,777 | |
Parkway Properties, Inc./Md | | | 22,648 | | | | 416,497 | |
Workspace Group PLC | | | 20,120 | | | | 237,829 | |
| | | | | | | | |
| | | | | | | 4,103,020 | |
| | | | | | | | |
LODGING–0.7% | | | | | | | | |
LODGING–0.7% | | | | | | | | |
Ashford Hospitality Prime, Inc. | | | 21,984 | | | | 377,245 | |
Ashford Hospitality Trust, Inc. | | | 35,531 | | | | 372,365 | |
Ashford, Inc.(a) | | | 408 | | | | 38,352 | |
Chatham Lodging Trust | | | 12,709 | | | | 368,180 | |
Hersha Hospitality Trust | | | 54,290 | | | | 381,659 | |
Japan Hotel REIT Investment Corp. | | | 252 | | | | 161,666 | |
Pebblebrook Hotel Trust | | | 2,240 | | | | 102,211 | |
Starwood Hotels & Resorts Worldwide, Inc. | | | 4,790 | | | | 388,325 | |
Wyndham Worldwide Corp. | | | 5,520 | | | | 473,395 | |
| | | | | | | | |
| | | | | | | 2,663,398 | |
| | | | | | | | |
FINANCIAL: OTHER–0.1% | | | | | | | | |
FINANCIAL: OTHER–0.1% | | | | | | | | |
HFF, Inc.–Class A | | | 8,480 | | | | 304,602 | |
| | | | | | | | |
MORTGAGE–0.1% | | | | | | | | |
MORTGAGE–0.1% | | | | | | | | |
Concentradora Hipotecaria SAPI de CV(a) | | | 104,000 | | | | 172,702 | |
| | | | | | | | |
Total Common Stocks (cost $187,529,465) | | | | | | | 230,223,280 | |
| | | | | | | | |
14
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
CORPORATES– INVESTMENT GRADE–8.9% | | | | | | | | | | | | |
INDUSTRIAL–5.6% | | | | | | | | | | | | |
BASIC–0.6% | | | | | | | | | | | | |
Barrick Gold Corp. 4.10%, 5/01/23 | | | U.S.$ | | | | 45 | | | $ | 43,794 | |
Basell Finance Co. BV 8.10%, 3/15/27(c) | | | | | | | 145 | | | | 194,309 | |
Cia Minera Milpo SAA 4.625%, 3/28/23(c) | | | | | | | 240 | | | | 235,543 | |
Dow Chemical Co. (The) 4.125%, 11/15/21 | | | | | | | 165 | | | | 174,340 | |
Glencore Funding LLC 4.125%, 5/30/23(c) | | | | | | | 126 | | | | 122,946 | |
International Paper Co. 3.65%, 6/15/24 | | | | | | | 48 | | | | 47,966 | |
LyondellBasell Industries NV 5.75%, 4/15/24 | | | | | | | 435 | | | | 497,506 | |
Minsur SA 6.25%, 2/07/24(c) | | | | | | | 333 | | | | 359,546 | |
Sociedad Quimica y Minera de Chile SA 3.625%, 4/03/23(c) | | | | | | | 237 | | | | 227,547 | |
Vale SA 5.625%, 9/11/42 | | | | | | | 51 | | | | 47,502 | |
Yamana Gold, Inc. 4.95%, 7/15/24 | | | | | | | 277 | | | | 270,346 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,221,345 | |
| | | | | | | | | | | | |
CAPITAL GOODS–0.1% | | | | | | | | | | | | |
Odebrecht Finance Ltd. 5.25%, 6/27/29(c) | | | | | | | 217 | | | | 189,766 | |
Owens Corning 6.50%, 12/01/16(f) | | | | | | | 11 | | | | 11,985 | |
Republic Services, Inc. 3.80%, 5/15/18 | | | | | | | 17 | | | | 17,986 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 219,737 | |
| | | | | | | | | | | | |
COMMUNICATIONS– MEDIA–1.0% | | | | | | | | | | | | |
21st Century Fox America, Inc. 3.00%, 9/15/22 | | | | | | | 400 | | | | 397,302 | |
6.15%, 2/15/41 | | | | | | | 130 | | | | 165,444 | |
CBS Corp. 5.75%, 4/15/20 | | | | | | | 250 | | | | 284,942 | |
Comcast Corp. 5.15%, 3/01/20 | | | | | | | 451 | | | | 510,767 | |
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 3.80%, 3/15/22 | | | | | | | 75 | | | | 76,303 | |
4.45%, 4/01/24 | | | | | | | 107 | | | | 111,955 | |
5.00%, 3/01/21 | | | | | | | 290 | | | | 316,245 | |
Globo Comunicacao e Participacoes SA 5.307%, 5/11/22(c)(g) | | | | | | | 221 | | | | 231,055 | |
| | | | | | | | | | | | |
NBCUniversal Enterprise, Inc. 5.25%, 3/19/21(c)(h) | | | U.S.$ | | | | 233 | | | $ | 241,737 | |
Omnicom Group, Inc. 3.625%, 5/01/22 | | | | | | | 165 | | | | 169,388 | |
Reed Elsevier Capital, Inc. 8.625%, 1/15/19 | | | | | | | 435 | | | | 532,062 | |
Time Warner Cable, Inc. 4.125%, 2/15/21 | | | | | | | 165 | | | | 176,581 | |
Time Warner, Inc. 4.70%, 1/15/21 | | | | | | | 123 | | | | 134,632 | |
7.625%, 4/15/31 | | | | | | | 110 | | | | 153,355 | |
Viacom, Inc. 3.875%, 4/01/24 | | | | | | | 110 | | | | 110,423 | |
5.625%, 9/15/19 | | | | | | | 83 | | | | 93,214 | |
WPP Finance 2010 4.75%, 11/21/21 | | | | | | | 77 | | | | 84,192 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,789,597 | |
| | | | | | | | | | | | |
COMMUNICATIONS– TELE-COMMUNICATIONS–0.6% | | | | | | | | | | | | |
American Tower Corp. 5.05%, 9/01/20 | | | | | | | 380 | | | | 412,278 | |
Deutsche Telekom International Finance BV 4.875%, 3/06/42(c) | | | | | | | 490 | | | | 523,776 | |
Rogers Communications, Inc. 4.00%, 6/06/22 | | | CAD | | | | 46 | | | | 41,790 | |
SBA Tower Trust 2.898%, 10/15/19(c) | | | U.S.$ | | | | 251 | | | | 251,658 | |
Telefonica Emisiones SAU 5.462%, 2/16/21 | | | | | | | 185 | | | | 206,274 | |
Verizon Communications, Inc. 3.50%, 11/01/24 | | | | | | | 418 | | | | 410,685 | |
6.55%, 9/15/43 | | | | | | | 297 | | | | 380,501 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,226,962 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL– AUTOMOTIVE–0.3% | | | | | | | | | |
Ford Motor Credit Co. LLC 5.875%, 8/02/21 | | | | | | | 915 | | | | 1,059,376 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL– RETAILERS–0.1% | | | | | | | | | |
Macy’s Retail Holdings, Inc. 3.875%, 1/15/22 | | | | | | | 201 | | | | 208,914 | |
Walgreens Boots Alliance, Inc./old 3.80%, 11/18/24 | | | | | | | 320 | | | | 326,368 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 535,282 | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.8% | | | | | | | | | | | | |
Actavis Funding SCS 3.85%, 6/15/24 | | | | | | | 89 | | | | 89,455 | |
Altria Group, Inc. 2.625%, 1/14/20 | | | | | | | 320 | | | | 320,929 | |
Bayer US Finance LLC 3.375%, 10/08/24(c) | | | | | | | 321 | | | | 326,641 | |
15
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Becton Dickinson and Co. 3.734%, 12/15/24 | | | U.S.$ | | | | 141 | | | $ | 145,170 | |
Bunge Ltd. Finance Corp. 5.10%, 7/15/15 | | | | | | | 69 | | | | 70,498 | |
8.50%, 6/15/19 | | | | | | | 153 | | | | 187,508 | |
Grupo Bimbo SAB de CV 3.875%, 6/27/24(c) | | | | | | | 339 | | | | 340,332 | |
Medtronic, Inc. 3.50%, 3/15/25(c) | | | | | | | 320 | | | | 327,350 | |
Perrigo Finance PLC 3.50%, 12/15/21 | | | | | | | 300 | | | | 303,499 | |
Reynolds American, Inc. 3.25%, 11/01/22 | | | | | | | 220 | | | | 214,289 | |
Thermo Fisher Scientific, Inc. 4.15%, 2/01/24 | | | | | | | 121 | | | | 127,605 | |
Tyson Foods, Inc. 2.65%, 8/15/19 | | | | | | | 64 | | | | 64,583 | |
3.95%, 8/15/24 | | | | | | | 206 | | | | 212,947 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,730,806 | |
| | | | | | | | | | | | |
ENERGY–1.3% | | | | | | | | | | | | |
Diamond Offshore Drilling, Inc. 4.875%, 11/01/43 | | | | | | | 111 | | | | 94,563 | |
Encana Corp. 3.90%, 11/15/21 | | | | | | | 140 | | | | 137,974 | |
Energy Transfer Partners LP 7.50%, 7/01/38 | | | | | | | 248 | | | | 307,801 | |
Enterprise Products Operating LLC 5.20%, 9/01/20 | | | | | | | 185 | | | | 204,034 | |
Kinder Morgan Energy Partners LP 2.65%, 2/01/19 | | | | | | | 302 | | | | 297,565 | |
3.95%, 9/01/22 | | | | | | | 424 | | | | 420,422 | |
6.85%, 2/15/20 | | | | | | | 330 | | | | 379,046 | |
Marathon Petroleum Corp. 5.125%, 3/01/21 | | | | | | | 163 | | | | 178,165 | |
Nabors Industries, Inc. 5.10%, 9/15/23 | | | | | | | 168 | | | | 159,508 | |
Noble Energy, Inc. 3.90%, 11/15/24 | | | | | | | 170 | | | | 168,019 | |
8.25%, 3/01/19 | | | | | | | 374 | | | | 448,389 | |
Noble Holding International Ltd. 3.95%, 3/15/22 | | | | | | | 202 | | | | 176,963 | |
4.90%, 8/01/20 | | | | | | | 36 | | | | 33,732 | |
Reliance Holding USA, Inc. 5.40%, 2/14/22(c) | | | | | | | 315 | | | | 340,990 | |
Sunoco Logistics Partners Operations LP 5.30%, 4/01/44 | | | | | | | 295 | | | | 297,346 | |
TransCanada PipeLines Ltd. 6.35%, 5/15/67 | | | | | | | 120 | | | | 116,400 | |
Transocean, Inc. 6.375%, 12/15/21 | | | | | | | 2 | | | | 1,845 | |
6.50%, 11/15/20 | | | | | | | 300 | | | | 282,890 | |
| | | | | | | | | | | | |
Valero Energy Corp. 6.125%, 2/01/20 | | | U.S.$ | | | | 175 | | | $ | 198,469 | |
Weatherford International Ltd./Bermuda 9.625%, 3/01/19 | | | | | | | 285 | | | | 338,033 | |
Williams Partners LP 4.125%, 11/15/20 | | | | | | | 155 | | | | 158,797 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,740,951 | |
| | | | | | | | | | | | |
OTHER INDUSTRIAL–0.1% | | | | | | | | | | | | |
Hutchison Whampoa International 14 Ltd. 1.625%, 10/31/17(c) | | | | | | | 320 | | | | 317,363 | |
| | | | | | | | | | | | |
TECHNOLOGY–0.5% | | | | | | | | | | | | |
Agilent Technologies, Inc. 5.00%, 7/15/20 | | | | | | | 71 | | | | 77,236 | |
Hewlett-Packard Co. 4.65%, 12/09/21 | | | | | | | 114 | | | | 122,067 | |
KLA-Tencor Corp. 4.65%, 11/01/24 | | | | | | | 320 | | | | 331,279 | |
Motorola Solutions, Inc. 3.50%, 3/01/23 | | | | | | | 300 | | | | 295,305 | |
7.50%, 5/15/25 | | | | | | | 35 | | | | 43,078 | |
Seagate HDD Cayman 4.75%, 1/01/25(c) | | | | | | | 127 | | | | 130,831 | |
Telefonaktiebolaget LM Ericsson 4.125%, 5/15/22 | | | | | | | 108 | | | | 112,967 | |
Tencent Holdings Ltd. 3.375%, 5/02/19(c) | | | | | | | 335 | | | | 340,506 | |
Total System Services, Inc. 2.375%, 6/01/18 | | | | | | | 141 | | | | 139,793 | |
3.75%, 6/01/23 | | | | | | | 139 | | | | 136,208 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,729,270 | |
| | | | | | | | | | | | |
TRANSPORTATION– AIRLINES–0.0% | | | | | | | | | | | | |
Southwest Airlines Co. 5.75%, 12/15/16 | | | | | | | 155 | | | | 167,470 | |
| | | | | | | | | | | | |
TRANSPORTATION– SERVICES–0.2% | | | | | | | | | | | | |
Asciano Finance Ltd. | | | | | | | | | | | | |
3.125%, 9/23/15(c) | | | | | | | 237 | | | | 239,769 | |
5.00%, 4/07/18(c) | | | | | | | 230 | | | | 247,263 | |
Ryder System, Inc. | | | | | | | | | | | | |
5.85%, 11/01/16 | | | | | | | 127 | | | | 137,145 | |
7.20%, 9/01/15 | | | | | | | 127 | | | | 132,347 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 756,524 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 20,494,683 | |
| | | | | | | | | | | | |
FINANCIAL INSTITUTIONS–2.7% | | | | | | | | | | | | |
BANKING–1.7% | | | | | | | | | | | | |
Barclays Bank PLC 6.625%, 3/30/22(c) | | | EUR | | | | 160 | | | | 249,776 | |
Compass Bank 5.50%, 4/01/20 | | | U.S.$ | | | | 314 | | | | 341,670 | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Countrywide Financial Corp. 6.25%, 5/15/16 | | U.S.$ | | | | | 92 | | | $ | 97,643 | |
Credit Suisse AG 6.50%, 8/08/23(c) | | | | | | | 267 | | | | 290,517 | |
Goldman Sachs Group, Inc. (The) | | | | | | | | | | | | |
5.75%, 1/24/22 | | | | | | | 335 | | | | 387,524 | |
Series D 6.00%, 6/15/20 | | | | | | | 440 | | | | 508,652 | |
ING Bank NV 2.00%, 9/25/15(c) | | | | | | | 480 | | | | 483,846 | |
Macquarie Bank Ltd. 5.00%, 2/22/17(c) | | | | | | | 90 | | | | 95,994 | |
Macquarie Group Ltd. 4.875%, 8/10/17(c) | | | | | | | 194 | | | | 207,442 | |
Morgan Stanley 5.625%, 9/23/19 | | | | | | | 168 | | | | 189,637 | |
Series G 5.50%, 7/24/20 | | | | | | | 189 | | | | 213,235 | |
Murray Street Investment Trust I 4.647%, 3/09/17 | | | | | | | 44 | | | | 46,437 | |
National Capital Trust II Delaware 5.486%, 3/23/15(c)(h) | | | | | | | 91 | | | | 91,455 | |
Nationwide Building Society 6.25%, 2/25/20(c) | | | | | | | 465 | | | | 545,456 | |
Nordea Bank AB 6.125%, 9/23/24(c)(h) | | | | | | | 200 | | | | 197,850 | |
PNC Bank NA 3.80%, 7/25/23 | | | | | | | 685 | | | | 706,096 | |
Rabobank Capital Funding Trust III 5.254%, 10/21/16(c)(h) | | | | | | | 190 | | | | 197,220 | |
Standard Chartered PLC 4.00%, 7/12/22(c) | | | | | | | 470 | | | | 477,868 | |
UBS AG/Stamford CT 7.625%, 8/17/22 | | | | | | | 380 | | | | 447,395 | |
Wells Fargo Bank NA 6.18%, 2/15/36 | | | | | | | 250 | | | | 325,339 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,101,052 | |
| | | | | | | | | | | | |
BROKERAGE–0.1% | | | | | | | | | | | | |
Nomura Holdings, Inc. 2.00%, 9/13/16 | | | | | | | 468 | | | | 471,775 | |
| | | | | | | | | | | | |
FINANCE–0.1% | | | | | | | | | | | | |
Aviation Capital Group Corp. 7.125%, 10/15/20(c) | | | | | | | 173 | | | | 198,318 | |
| | | | | | | | | | | | |
INSURANCE–0.6% | | | | | | | | | | | | |
Allied World Assurance Co. Holdings Ltd. 7.50%, 8/01/16 | | | | | | | 160 | | | | 174,665 | |
| | | | | | | | | | | | |
American International Group, Inc. 4.875%, 6/01/22 | | U.S.$ | | | | | 155 | | | $ | 174,118 | |
6.40%, 12/15/20 | | | | | | | 300 | | | | 357,741 | |
Dai-ichi Life Insurance Co., Ltd. (The) 5.10%, 10/28/24(c)(h) | | | | | | | 320 | | | | 332,800 | |
Hartford Financial Services Group, Inc. (The) 4.00%, 3/30/15 | | | | | | | 95 | | | | 95,751 | |
5.125%, 4/15/22 | | | | | | | 180 | | | | 202,336 | |
5.50%, 3/30/20 | | | | | | | 242 | | | | 273,481 | |
Lincoln National Corp. 8.75%, 7/01/19 | | | | | | | 98 | | | | 122,454 | |
MetLife, Inc. 10.75%, 8/01/39 | | | | | | | 70 | | | | 113,750 | |
Prudential Financial, Inc. 5.625%, 6/15/43 | | | | | | | 200 | | | | 204,460 | |
XLIT Ltd. 6.375%, 11/15/24 | | | | | | | 157 | | | | 186,786 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,238,342 | |
| | | | | | | | | | | | |
OTHER FINANCE–0.1% | | | | | | | | | | | | |
ORIX Corp. 4.71%, 4/27/15 | | | | | | | 336 | | | | 339,999 | |
| | | | | | | | | | | | |
REITS–0.1% | | | | | | | | | | | | |
Health Care REIT, Inc. 5.25%, 1/15/22 | | | | | | | 300 | | | | 333,355 | |
Trust F/1401 5.25%, 12/15/24(c) | | | | | | | 270 | | | | 278,127 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 611,482 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 9,960,968 | |
| | | | | | | | | | | | |
NON CORPORATE SECTORS–0.3% | | | | | | | | | | | | |
AGENCIES–NOT GOVERNMENT GUARANTEED–0.3% | | | | | | | | | | | | |
CNOOC Finance 2013 Ltd. 3.00%, 5/09/23 | | | | | | | 286 | | | | 270,673 | |
OCP SA 5.625%, 4/25/24(c) | | | | | | | 335 | | | | 351,750 | |
Petrobras International Finance Co. SA 5.75%, 1/20/20 | | | | | | | 483 | | | | 466,438 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,088,861 | |
| | | | | | | | | | | | |
UTILITY–0.3% | | | | | | | | | | | | |
ELECTRIC–0.1% | | | | | | | | | | | | |
CMS Energy Corp. 5.05%, 3/15/22 | | | | | | | 155 | | | | 173,772 | |
Constellation Energy Group, Inc. 5.15%, 12/01/20 | | | | | | | 89 | | | | 98,541 | |
Exelon Generation Co. LLC 4.25%, 6/15/22 | | | | | | | 128 | | | | 133,015 | |
Pacific Gas & Electric Co. 6.05%, 3/01/34 | | | | | | | 38 | | | | 48,378 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 453,706 | |
| | | | | | | | | | | | |
17
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
NATURAL GAS–0.2% | | | | | | | | | | | | |
Talent Yield Investments Ltd. 4.50%, 4/25/22(c) | | | U.S.$ | | | | 490 | | | $ | 512,971 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 966,677 | |
| | | | | | | | | | | | |
Total Corporates–Investment Grade (cost $31,041,637) | | | | | | | | | | | 32,511,189 | |
| | | | | | | | | | | | |
GOVERNMENTS–TREASURIES–6.6% | | | | | | | | | |
BRAZIL–0.2% | | | | | | | | | | | | |
Brazil Notas do Tesouro Nacional Series F 10.00%, 1/01/17 | | | BRL | | | | 1,670 | | | | 598,109 | |
MEXICO–0.3% | | | | | | | | | | | | |
Mexican Bonos Series M 10 7.75%, 12/14/17 | | | MXN | | | | 13,442 | | | | 995,042 | |
UNITED STATES–6.1% | | | | | | | | | | | | |
U.S. Treasury Bonds | | | | | | | | | | | | |
2.75%, 8/15/42 | | | U.S.$ | | | | 280 | | | | 279,913 | |
3.00%, 11/15/44 | | | | | | | 503 | | | | 528,937 | |
3.125%, 2/15/43–8/15/44 | | | | | | | 1,185 | | | | 1,274,614 | |
3.375%, 5/15/44 | | | | | | | 234 | | | | 263,320 | |
3.625%, 8/15/43–2/15/44 | | | | | | | 1,380 | | | | 1,622,693 | |
4.50%, 2/15/36 | | | | | | | 223 | | | | 297,444 | |
4.625%, 2/15/40 | | | | | | | 3,320 | | | | 4,513,125 | |
5.375%, 2/15/31 | | | | | | | 891 | | | | 1,241,901 | |
U.S. Treasury Notes | | | | | | | | | | | | |
1.25%, 10/31/18 | | | | | | | 1,115 | | | | 1,107,770 | |
1.50%, 1/31/19 | | | | | | | 288 | | | | 288,113 | |
1.625%, 8/31/19 | | | | | | | 545 | | | | 545,596 | |
2.00%, 11/15/21 | | | | | | | 645 | | | | 647,368 | |
2.25%, 11/15/24 | | | | | | | 985 | | | | 991,618 | |
2.375%, 8/15/24 | | | | | | | 694 | | | | 706,443 | |
2.50%, 8/15/23–5/15/24 | | | | | | | 6,181 | | | | 6,368,299 | |
2.75%, 2/15/24 | | | | | | | 1,597 | | | | 1,680,679 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 22,357,833 | |
| | | | | | | | | | | | |
Total Governments–Treasuries (cost $22,183,239) | | | | | | | | | | | 23,950,984 | |
| | | | | | | | | | | | |
MORTGAGE PASS-THROUGHS–6.3% | | | | | | | | | |
AGENCY FIXED RATE 30-YEAR–5.8% | | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. Gold 4.50%, 9/01/44 | | | | | | | 586 | | | | 643,384 | |
Series 2005 5.50%, 1/01/35 | | | | | | | 363 | | | | 409,996 | |
Series 2007 5.50%, 7/01/35 | | | | | | | 37 | | | | 41,645 | |
Federal National Mortgage Association 3.00%, 11/01/42–8/01/43 | | | | | | | 2,594 | | | | 2,627,755 | |
| | | | | | | | | | | | |
3.50%, 1/01/45, TBA | | | U.S.$ | | | | 4,807 | | | $ | 5,010,922 | |
4.00%, 1/01/45, TBA | | | | | | | 5,884 | | | | 6,279,310 | |
4.50%, 11/01/43–10/01/44 | | | | | | | 1,171 | | | | 1,288,405 | |
4.50%, 1/25/45, TBA | | | | | | | 1,592 | | | | 1,728,066 | |
5.00%, 12/01/39 | | | | | | | 243 | | | | 268,125 | |
Series 2004 5.50%, 2/01/34–11/01/34 | | | | | | | 137 | | | | 153,682 | |
Series 2007 5.50%, 1/01/37–8/01/37 | | | | | | | 507 | | | | 570,265 | |
Series 2008 5.50%, 8/01/37 | | | | | | | 218 | | | | 245,006 | |
Series 2012 3.00%, 11/01/42 | | | | | | | 611 | | | | 619,565 | |
Series 2014 4.50%, 2/01/44 | | | | | | | 110 | | | | 120,084 | |
Government National Mortgage Association 3.50%, 1/01/45, TBA | | | | | | | 1,294 | | | | 1,358,296 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 21,364,506 | |
| | | | | | | | | | | | |
AGENCY FIXED RATE 15-YEAR–0.5% | | | | | | | | | | | | |
Federal National Mortgage Association 3.00%, 1/01/29, TBA | | | | | | | 1,645 | | | | 1,709,836 | |
| | | | | | | | | | | | |
Total Mortgage Pass-Throughs (cost $22,680,385) | | | | | | | | | | | 23,074,342 | |
| | | | | | | | | | | | |
ASSET-BACKED SECURITIES–5.0% | | | | | | | | | | | | |
AUTOS–FIXED RATE–3.0% | | | | | | | | | | | | |
Ally Master Owner Trust | | | | | | | | | | | | |
Series 2013-1, Class A2 1.00%, 2/15/18 | | | | | | | 390 | | | | 390,480 | |
Series 2014-1, Class A2 1.29%, 1/15/19 | | | | | | | 336 | | | | 335,265 | |
AmeriCredit Automobile Receivables Trust | | | | | | | | | | | | |
Series 2011-3, Class D 4.04%, 7/10/17 | | | | | | | 320 | | | | 325,749 | |
Series 2013-3, Class A3 0.92%, 4/09/18 | | | | | | | 670 | | | | 670,433 | |
Series 2013-4, Class A3 0.96%, 4/09/18 | | | | | | | 275 | | | | 275,353 | |
Series 2013-5, Class A2A 0.65%, 3/08/17 | | | | | | | 85 | | | | 84,769 | |
Series 2014-1, Class A3 0.90%, 2/08/19 | | | | | | | 310 | | | | 308,207 | |
ARI Fleet Lease Trust Series 2014-A, Class A2 0.81%, 11/15/22(c) | | | | | | | 149 | | | | 148,390 | |
Avis Budget Rental Car Funding AESOP LLC Series 2014-1A, Class A 2.46%, 7/20/20(c) | | | | | | | 705 | | | | 704,564 | |
18
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
California Republic Auto Receivables Trust Series 2014-2, Class A4 1.57%, 12/16/19 | | | U.S.$ | | | | 203 | | | $ | 202,415 | |
Capital Auto Receivables Asset Trust Series 2013-3, Class A2 1.04%, 11/21/16 | | | | | | | 570 | | | | 571,316 | |
Series 2014-1, Class B 2.22%, 1/22/19 | | | | | | | 80 | | | | 80,702 | |
Carfinance Capital Auto Trust Series 2013-1A, Class A 1.65%, 7/17/17(c) | | | | | | | 71 | | | | 71,462 | |
Chrysler Capital Auto Receivables Trust Series 2014-BA, Class A2 0.69%, 9/15/17(c) | | | | | | | 464 | | | | 463,925 | |
CPS Auto Receivables Trust Series 2013-B, Class A 1.82%, 9/15/20(c) | | | | | | | 192 | | | | 191,517 | |
Series 2014-B, Class A 1.11%, 11/15/18(c) | | | | | | | 159 | | | | 158,509 | |
Enterprise Fleet Financing LLC Series 2014-1, Class A2 0.87%, 9/20/19(c) | | | | | | | 214 | | | | 214,047 | |
Series 2014-2, Class A2 1.05%, 3/20/20(c) | | | | | | | 270 | | | | 269,656 | |
Exeter Automobile Receivables Trust Series 2012-2A, Class A 1.30%, 6/15/17(c) | | | | | | | 44 | | | | 43,988 | |
Series 2013-1A, Class A 1.29%, 10/16/17(c) | | | | | | | 71 | | | | 71,475 | |
Series 2014-1A, Class A 1.29%, 5/15/18(c) | | | | | | | 97 | | | | 97,133 | |
Series 2014-2A, Class A 1.06%, 8/15/18(c) | | | | | | | 96 | | | | 96,264 | |
Fifth Third Auto Trust Series 2014-3, Class A4 1.47%, 5/17/21 | | | | | | | 268 | | | | 266,394 | |
Flagship Credit Auto Trust Series 2013-1, Class A 1.32%, 4/16/18(c) | | | | | | | 80 | | | | 79,960 | |
Ford Auto Securitization Trust Series 2013-R1A, Class A2 1.676%, 9/15/16(c) | | | CAD | | | | 153 | | | | 131,726 | |
Series 2014-R2A, Class A1 1.353%, 3/15/16(c) | | | | | | | 86 | | | | 74,148 | |
Ford Credit Auto Lease Trust Series 2014-B, Class A3 0.89%, 9/15/17 | | | U.S.$ | | | | 244 | | | | 243,403 | |
| | | | | | | | | | | | |
Ford Credit Auto Owner Trust Series 2012-D, Class B 1.01%, 5/15/18 | | | U.S.$ | | | | 155 | | | $ | 153,977 | |
Series 2014-2, Class A 2.31%, 4/15/26(c) | | | | | | | 286 | | | | 287,216 | |
Series 2014-B, Class A2 0.47%, 3/15/17 | | | | | | | 366 | | | | 365,939 | |
Ford Credit Floorplan Master Owner Trust Series 2013-1, Class A1 0.85%, 1/15/18 | | | | | | | 279 | | | | 279,084 | |
Series 2014-1, Class A1 1.20%, 2/15/19 | | | | | | | 322 | | | | 320,957 | |
Harley-Davidson Motorcycle Trust Series 2014-1, Class A3 1.10%, 9/15/19 | | | | | | | 270 | | | | 269,487 | |
Hertz Vehicle Financing LLC Series 2013-1A, Class A1 1.12%, 8/25/17(c) | | | | | | | 345 | | | | 344,213 | |
Hyundai Auto Receivables Trust Series 2012-B, Class C 1.95%, 10/15/18 | | | | | | | 140 | | | | 141,782 | |
Mercedes-Benz Master Owner Trust Series 2012-AA, Class A 0.79%, 11/15/17(c) | | | | | | | 714 | | | | 713,977 | |
Santander Drive Auto Receivables Trust Series 2013-4, Class A3 1.11%, 12/15/17 | | | | | | | 521 | | | | 522,486 | |
Series 2013-5, Class A2A 0.64%, 4/17/17 | | | | | | | 61 | | | | 60,574 | |
Series 2014-2, Class A3 0.80%, 4/16/18 | | | | | | | 335 | | | | 334,121 | |
Volkswagen Auto Loan Enhanced Trust Series 2014-1, Class A3 0.91%, 10/22/18 | | | | | | | 634 | | | | 631,314 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 10,996,377 | |
| | | | | | | | | | | | |
CREDIT CARDS– FLOATING RATE–0.5% | | | | | | | | | | | | |
Barclays Dryrock Issuance Trust Series 2014-2, Class A 0.501%, 3/16/20(f) | | | | | | | 337 | | | | 337,000 | |
Cabela’s Master Credit Card Trust Series 2012-1A, Class A2 0.691%, 2/18/20(c)(f) | | | | | | | 325 | | | | 327,256 | |
19
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
First National Master Note Trust Series 2013-2, Class A 0.691%, 10/15/19(f) | | | U.S.$ | | | | 346 | | | $ | 346,808 | |
Gracechurch Card Funding PLC Series 2012-1A, Class A1 0.861%, 2/15/17(c)(f) | | | | | | | 490 | | | | 490,193 | |
World Financial Network Credit Card Master Trust Series 2014-A, Class A 0.541%, 12/15/19(f) | | | | | | | 295 | | | | 295,537 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,796,794 | |
| | | | | | | | | | | | |
AUTOS–FLOATING RATE–0.5% | | | | | | | | | | | | |
Ally Master Owner Trust Series 2014-2, Class A 0.531%, 1/16/18(f) | | | | | | | 630 | | | | 629,704 | |
GE Dealer Floorplan Master Note Trust Series 2012-4, Class A 0.606%, 10/20/17(f) | | | | | | | 256 | | | | 255,979 | |
Hertz Fleet Lease Funding LP Series 2013-3, Class A 0.711%, 12/10/27(c)(f) | | | | | | | 330 | | | | 330,398 | |
Navistar Financial Dealer Note Master Trust Series 2014-1, Class A 0.92%, 10/25/19(c)(f) | | | | | | | 207 | | | | 207,000 | |
NCF Dealer Floorplan Master Trust Series 2014-1A, Class A 1.665%, 10/20/20(c)(f) | | | | | | | 320 | | | | 319,471 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,742,552 | |
| | | | | | | | | | | | |
CREDIT CARDS–FIXED RATE–0.4% | | | | | | | | | | | | |
American Express Credit Account Master Trust Series 2014-2, Class A 1.26%, 1/15/20 | | | | | | | 141 | | | | 140,880 | |
Barclays Dryrock Issuance Trust Series 2014-3, Class A 2.41%, 7/15/22 | | | | | | | 326 | | | | 329,054 | |
Chase Issuance Trust Series 2014-A1, Class A1 1.15%, 1/15/19 | | | | | | | 270 | | | | 269,995 | |
Synchrony Credit Card Master Note Trust Series 2012-2, Class A 2.22%, 1/15/22 | | | | | | | 379 | | | | 378,716 | |
World Financial Network Credit Card Master Trust Series 2012-B, Class A 1.76%, 5/17/21 | | | | | | | 310 | | | | 311,741 | |
| | | | | | | | | | | | |
Series 2013-A, Class A 1.61%, 12/15/21 | | | U.S.$ | | | | 246 | | | $ | 244,351 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,674,737 | |
| | | | | | | | | | | | |
OTHER ABS–FIXED RATE–0.4% | | | | | | | | | | | | |
CIT Equipment Collateral Series 2013-VT1, Class A3 1.13%, 7/20/20(c) | | | | | | | 466 | | | | 466,483 | |
Series 2014-VT1, Class A2 0.86%, 5/22/17(c) | | | | | | | 319 | | | | 318,980 | |
CNH Capital Canada Receivables Trust Series 2014-1A, Class A1 1.388%, 3/15/17(c) | | | CAD | | | | 135 | | | | 116,079 | |
CNH Equipment Trust Series 2014-B, Class A4 1.61%, 5/17/21 | | | U.S.$ | | | | 210 | | | | 209,034 | |
GE Equipment Small Ticket LLC Series 2014-1A, Class A2 0.59%, 8/24/16(c) | | | | | | | 307 | | | | 307,179 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,417,755 | |
| | | | | | | | | | | | |
OTHER ABS–FLOATING RATE–0.1% | | | | | | | | | | | | |
GE Dealer Floorplan Master Note Trust Series 2014-1, Class A 0.546%, 7/20/19(f) | | | | | | | 407 | | | | 406,607 | |
| | | | | | | | | | | | |
HOME EQUITY LOANS–FLOATING RATE–0.1% | | | | | | | | | | | | |
GSAA Trust Series 2006-5, Class 2A3 0.44%, 3/25/36(f) | | | | | | | 381 | | | | 261,812 | |
Residential Asset Securities Corp. Trust Series 2003-KS3, Class A2 0.77%, 5/25/33(f) | | | | | | | 1 | | | | 830 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 262,642 | |
| | | | | | | | | | | | |
HOME EQUITY LOANS–FIXED RATE–0.0% | | | | | | | | | | | | |
Credit-Based Asset Servicing and Securitization LLC Series 2003-CB1, Class AF 3.95%, 1/25/33 | | | | | | | 81 | | | | 81,555 | |
| | | | | | | | | | | | |
Total Asset-Backed Securities (cost $18,412,961) | | | | | | | | | | | 18,379,019 | |
| | | | | | | | | | | | |
COMMERCIAL MORTGAGE-BACKED SECURITIES–3.4% | | | | | | | | | | | | |
NON-AGENCY FIXED RATE CMBS–2.9% | | | | | | | | | | | | |
Banc of America Commercial Mortgage Trust Series 2007-4, Class A1A 5.774%, 2/10/51 | | | | | | | 553 | | | | 603,156 | |
20
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2007-5, Class AM 5.772%, 2/10/51 | | U.S.$ | | | | | 150 | | | $ | 158,282 | |
Bear Stearns Commercial Mortgage Securities Trust Series 2006-PW13, Class AJ 5.611%, 9/11/41 | | | | | | | 184 | | | | 188,807 | |
BHMS Mortgage Trust Series 2014-ATLS, Class AFX 3.601%, 7/05/33(c) | | | | | | | 335 | | | | 338,079 | |
CGRBS Commercial Mortgage Trust Series 2013-VN05, Class A 3.369%, 3/13/35(c) | | | | | | | 495 | | | | 508,329 | |
Citigroup Commercial Mortgage Trust Series 2006-C4, Class A1A 5.771%, 3/15/49 | | | | | | | 261 | | | | 272,449 | |
COBALT CMBS Commercial Mortgage Trust Series 2007-C3, Class A4 5.766%, 5/15/46 | | | | | | | 277 | | | | 300,321 | |
Commercial Mortgage Loan Trust Series 2008-LS1, Class A1A 6.04%, 12/10/49 | | | | | | | 1,013 | | | | 1,106,441 | |
Commercial Mortgage Pass-Through Certificates Series 2013-SFS, Class A1 1.873%, 4/12/35(c) | | | | | | | 215 | | | | 210,677 | |
Credit Suisse Commercial Mortgage Trust Series 2007-C3, Class AM 5.702%, 6/15/39 | | | | | | | 155 | | | | 162,466 | |
Extended Stay America Trust Series 2013-ESH7, Class A17 2.295%, 12/05/31(c) | | | | | | | 330 | | | | 325,881 | |
GS Mortgage Securities Corp. II Series 2013-KING, Class A 2.706%, 12/10/27(c) | | | | | | | 492 | | | | 497,047 | |
GS Mortgage Securities Trust Series 2013-G1, Class A2 3.557%, 4/10/31(c) | | | | | | | 276 | | | | 276,310 | |
| | | | | | | | | | | | |
JP Morgan Chase Commercial Mortgage Securities Trust Series 2004-LN2, Class A1A 4.838%, 7/15/41(c) | | U.S.$ | | | | | 109 | | | $ | 108,802 | |
Series 2005-CB11, Class A4 5.335%, 8/12/37 | | | | | | | 63 | | | | 63,384 | |
Series 2007-CB19, Class AM 5.698%, 2/12/49 | | | | | | | 175 | | | | 184,784 | |
Series 2007-LD12, Class AM 6.011%, 2/15/51 | | | | | | | 280 | | | | 305,056 | |
Series 2007-LDPX, Class A1A 5.439%, 1/15/49 | | | | | | | 592 | | | | 633,212 | |
Series 2008-C2, Class A1A 5.998%, 2/12/51 | | | | | | | 270 | | | | 296,545 | |
Series 2010-C2, Class A1 2.749%, 11/15/43(c) | | | | | | | 269 | | | | 272,422 | |
LB-UBS Commercial Mortgage Trust Series 2006-C1, Class A4 5.156%, 2/15/31 | | | | | | | 606 | | | | 620,204 | |
LSTAR Commercial Mortgage Trust Series 2014-2, Class A2 2.767%, 1/20/41(c) | | | | | | | 188 | | | | 189,616 | |
Merrill Lynch Mortgage Trust Series 2006-C2, Class A1A 5.739%, 8/12/43 | | | | | | | 317 | | | | 335,534 | |
ML-CFC Commercial Mortgage Trust Series 2006-4, Class A1A 5.166%, 12/12/49 | | | | | | | 594 | | | | 626,390 | |
Motel 6 Trust Series 2012-MTL6, Class A2 1.948%, 10/05/25 (c) | | | | | | | 480 | | | | 478,464 | |
UBS-Barclays Commercial Mortgage Trust Series 2012-C3, Class A4 3.091%, 8/10/49 | | | | | | | 86 | | | | 86,880 | |
Series 2012-C4, Class A5 2.85%, 12/10/45 | | | | | | | 168 | | | | 167,289 | |
Wachovia Bank Commercial Mortgage Trust Series 2006-C23, Class A5 5.416%, 1/15/45 | | | | | | | 616 | | | | 638,175 | |
WFRBS Commercial Mortgage Trust Series 2013-C14, Class A5 3.337%, 6/15/46 | | | | | | | 456 | | | | 469,446 | |
21
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2014-C20, Class A2 3.036%, 5/15/47 | | U.S.$ | | | | | 206 | | | $ | 212,923 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 10,637,371 | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING RATE CMBS–0.5% | | | | | | | | | | | | |
Carefree Portfolio Trust Series 2014-CARE, Class A 1.485%, 11/15/19(c)(f) | | | | | | | 169 | | | | 168,343 | |
Commercial Mortgage Pass Through Certificates Series 2014-KYO, Class A 1.059%, 6/11/27(c)(f) | | | | | | | 208 | | | | 208,050 | |
Series 2014-SAVA, Class A 1.311%, 6/15/34(c)(f) | | | | | | | 191 | | | | 190,831 | |
Extended Stay America Trust Series 2013-ESFL, Class A2FL 0.857%, 12/05/31(c)(f) | | | | | | | 250 | | | | 249,185 | |
JP Morgan Chase Commercial Mortgage Securities Trust Series 2014-INN, Class A 1.081%, 6/15/29(c)(f) | | | | | | | 339 | | | | 338,681 | |
PFP III Ltd. Series 2014-1, Class A 1.331%, 6/14/31(c)(f) | | | | | | | 381 | | | | 379,706 | |
Resource Capital Corp., Ltd. Series 2014-CRE2, Class A 1.212%, 4/15/32(c)(f) | | | | | | | 157 | | | | 155,434 | |
Starwood Retail Property Trust Series 2014-STAR, Class A 1.381%, 11/15/27(c)(f) | | | | | | | 183 | | | | 182,536 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,872,766 | |
| | | | | | | | | | | | |
Total Commercial Mortgage-Backed Securities (cost $12,706,828) | | | | | | | | | | | 12,510,137 | |
| | | | | | | | | | | | |
CORPORATES– NON-INVESTMENT GRADE–1.5% | | | | | |
FINANCIAL INSTITUTIONS–0.9% | | | | | | | | | | | | |
BANKING–0.8% | | | | | | | | | | | | |
ABN AMRO Bank NV 4.31%, 3/10/16(h) | | | EUR | | | | 63 | | | | 77,185 | |
| | | | | | | | | | | | |
Bank of America Corp. Series Z 6.50%, 10/23/24(h) | | U.S.$ | | | | | 128 | | | $ | 130,291 | |
Bank of Ireland 2.08%, 9/22/15(e)(f) | | | CAD | | | | 185 | | | | 154,459 | |
Barclays Bank PLC 6.86%, 6/15/32(c)(h) | | U.S.$ | | | | | 44 | | | | 48,840 | |
7.625%, 11/21/22 | | | | | | | 239 | | | | 261,329 | |
7.75%, 4/10/23 | | | | | | | 305 | | | | 332,450 | |
BNP Paribas SA 5.186%, 6/29/15(c)(h) | | | | | | | 128 | | | | 128,000 | |
Credit Agricole SA 7.875%, 1/23/24(c)(h) | | | | | | | 205 | | | | 208,075 | |
Danske Bank A/S 5.684%, 2/15/17(h) | | | GBP | | | | 71 | | | | 113,427 | |
HBOS Capital Funding LP 4.939%, 5/23/16(h) | | | EUR | | | | 298 | | | | 360,234 | |
Intesa Sanpaolo SpA 5.017%, 6/26/24(c) | | U.S.$ | | | | | 339 | | | | 329,005 | |
LBG Capital No.1 PLC 8.00%, 6/15/20(c)(h) | | | | | | | 94 | | | | 100,110 | |
Royal Bank of Scotland PLC (The) 9.50%, 3/16/22(c) | | | | | | | 215 | | | | 244,329 | |
Skandinaviska Enskilda Banken AB 5.471%, 3/23/15(c)(h) | | | | | | | 185 | | | | 185,925 | |
Societe Generale SA 4.196%, 1/26/15(h) | | | EUR | | | | 102 | | | | 123,425 | |
5.922%, 4/05/17(c)(h) | | U.S.$ | | | | | 100 | | | | 103,688 | |
UniCredit Luxembourg Finance SA 6.00%, 10/31/17(c) | | | | | | | 230 | | | | 245,022 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,145,794 | |
| | | | | | | | | | | | |
FINANCE–0.1% | | | | | | | | | | | | |
AerCap Aviation Solutions BV 6.375%, 5/30/17 | | | | | | | 200 | | | | 211,500 | |
International Lease Finance Corp. 5.875%, 4/01/19 | | | | | | | 93 | | | | 100,208 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 311,708 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,457,502 | |
| | | | | | | | | | | | |
INDUSTRIAL–0.5% | | | | | | | | | | | | |
BASIC–0.0% | | | | | | | | | | | | |
Novelis, Inc. 8.375%, 12/15/17 | | | | | | | 29 | | | | 30,087 | |
| | | | | | | | | | | | |
COMMUNICATIONS– MEDIA–0.1% | | | | | | | | | | | | |
CSC Holdings LLC 8.625%, 2/15/19 | | | | | | | 44 | | | | 51,150 | |
Numericable-SFR 5.375%, 5/15/22 (c) | | | EUR | | | | 195 | | | | 243,510 | |
Univision Communications, Inc. 6.875%, 5/15/19(c) | | U.S.$ | | | | | 102 | | | | 106,208 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 400,868 | |
| | | | | | | | | | | | |
22
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
COMMUNICATIONS–TELE– COMMUNICATIONS–0.1% | | | | | | | | | |
Sprint Corp. 7.875%, 9/15/23 | | U.S.$ | | | | | 205 | | | $ | 202,376 | |
Telecom Italia Capital SA 6.00%, 9/30/34 | | | | | | | 65 | | | | 65,000 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 267,376 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL– AUTOMOTIVE–0.1% | | | | | | | | | | | | |
General Motors Co. 3.50%, 10/02/18 | | | | | | | 130 | | | | 132,600 | |
Goodyear Tire & Rubber Co. (The) 8.25%, 8/15/20 | | | | | | | 60 | | | | 63,600 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 196,200 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–OTHER–0.1% | | | | | | | | | |
KB Home 4.75%, 5/15/19 | | | | | | | 107 | | | | 105,395 | |
MCE Finance Ltd. 5.00%, 2/15/21(c) | | | | | | | 210 | | | | 197,400 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 302,795 | |
| | | | | | | | | | | | |
CONSUMER NON- CYCLICAL–0.0% | | | | | | | | | | | | |
CHS/Community Health Systems, Inc. 5.125%, 8/15/18 | | | | | | | 56 | | | | 57,960 | |
| | | | | | | | | | | | |
ENERGY– 0.1% | | | | | | | | | | | | |
Access Midstream Partners LP/ACMP Finance Corp. 4.875%, 3/15/24 | | | | | | | 129 | | | | 130,935 | |
California Resources Corp. 5.50%, 9/15/21(c) | | | | | | | 89 | | | | 76,095 | |
Paragon Offshore PLC 6.75%, 7/15/22(c) | | | | | | | 18 | | | | 10,980 | |
7.25%, 8/15/24(c) | | | | | | | 116 | | | | 69,600 | |
SM Energy Co. 6.50%, 1/01/23 | | | | | | | 14 | | | | 13,440 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 301,050 | |
| | | | | | | | | | | | |
SERVICES–0.0% | | | | | | | | | | | | |
Sabre GLBL, Inc. 8.50%, 5/15/19(c) | | | | | | | 118 | | | | 126,260 | |
| | | | | | | | | | | | |
TRANSPORTATION– SERVICES–0.0% | | | | | |
Hertz Corp. (The) 6.75%, 4/15/19 | | | | | | | 113 | | | | 116,390 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,798,986 | |
| | | | | | | | | | | | |
UTILITY–0.1% | | | | | | | | | | | | |
ELECTRIC–0.1% | | | | | | | | | | | | |
AES Corp./VA 7.375%, 7/01/21 | | | | | | | 119 | | | | 134,470 | |
| | | | | | | | | | | | |
NRG Energy, Inc. 6.25%, 5/01/24(c) | | U.S.$ | | | | | 92 | | | $ | 93,610 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 228,080 | |
| | | | | | | | | | | | |
Total Corporates–Non-Investment Grade (cost $5,469,063) | | | | | | | | | | | 5,484,568 | |
| | | | | | | | | | | | |
INFLATION-LINKED SECURITIES–1.1% | | | | | | | | | | | | |
U.S. Treasury Inflation Index 0.125%, 4/15/19 (TIPS) (cost $4,230,869) | | | | | | | 4,141 | | | | 4,095,017 | |
| | | | | | | | | | | | |
COLLATERALIZED MORTGAGE OBLIGATIONS–1.1% | | | | | | | | | | | | |
NON-AGENCY FIXED RATE–0.5% | | | | | | | | | | | | |
Alternative Loan Trust Series 2005-20CB, Class 3A6 5.50%, 7/25/35 | | | | | | | 54 | | | | 50,626 | |
Series 2005-57CB, Class 4A3 5.50%, 12/25/35 | | | | | | | 141 | | | | 129,795 | |
Series 2006-24CB, Class A16 5.75%, 6/25/36 | | | | | | | 211 | | | | 185,908 | |
Series 2006-28CB, Class A14 6.25%, 10/25/36 | | | | | | | 145 | | | | 124,078 | |
Series 2006-J1, Class 1A13 5.50%, 2/25/36 | | | | | | | 135 | | | | 121,859 | |
Chase Mortgage Finance Trust Series 2007-S5, Class 1A17 6.00%, 7/25/37 | | | | | | | 70 | | | | 60,850 | |
Citigroup Mortgage Loan Trust, Inc. Series 2005-2, Class 1A4 2.552%, 5/25/35 | | | | | | | 29 | | | | 27,922 | |
Countrywide Home Loan Mortgage Pass-Through Trust Series 2006-10, Class 1A8 6.00%, 5/25/36 | | | | | | | 122 | | | | 111,438 | |
Series 2006-13, Class 1A18 6.25%, 9/25/36 | | | | | | | 187 | | | | 173,188 | |
Series 2006-13, Class 1A19 6.25%, 9/25/36 | | | | | | | 67 | | | | 62,287 | |
23
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2007-HYB2, Class 3A1 2.581%, 2/25/47 | | U.S.$ | | | | | 296 | | | $ | 245,009 | |
First Horizon Alternative Mortgage Securities Trust Series 2006-FA3, Class A9 6.00%, 7/25/36 | | | | | | | 250 | | | | 210,489 | |
JP Morgan Mortgage Trust Series 2007-S3, Class 1A8 6.00%, 8/25/37 | | | | | | | 95 | | | | 86,727 | |
Wells Fargo Mortgage Backed Securities Trust Series 2007-8, Class 2A5 5.75%, 7/25/37 | | | | | | | 91 | | | | 89,056 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,679,232 | |
| | | | | | | | | | | | |
GSE RISK SHARE FLOATING RATE–0.3% | | | | | | | | | |
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes Series 2013-DN2, Class M2 4.405%, 11/25/23(f) | | | | | | | 340 | | | | 342,923 | |
Series 2014-DN3, Class M3 4.17%, 8/25/24(f) | | | | | | | 330 | | | | 310,435 | |
Series 2014-HQ3, Class M3 4.92%, 10/25/24(f) | | | | | | | 256 | | | | 251,417 | |
Federal National Mortgage Association Connecticut Avenue Securities Series 2014-C03, Class 1M1 1.37%, 7/25/24(f) | | | | | | | 121 | | | | 120,236 | |
Series 2014-C04, Class 1M2 5.055%, 11/25/24(f) | | | | | | | 255 | | | | 256,538 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,281,549 | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING RATE–0.3% | | | | | | | | | |
Deutsche Alt-A Securities Mortgage Loan Trust Series 2006-AR4, Class A2 0.36%, 12/25/36(f) | | | | | | | 412 | | | | 249,164 | |
HomeBanc Mortgage Trust Series 2005-1, Class A1 0.42%, 3/25/35(f) | | | | | | | 207 | | | | 184,538 | |
| | | | | | | | | | | | |
IndyMac Index Mortgage Loan Trust Series 2006-AR15, Class A1 0.29%, 7/25/36(f) | | U.S.$ | | | | | 304 | | | $ | 233,374 | |
Series 2006-AR27, Class 2A2 0.37%, 10/25/36(f) | | | | | | | 325 | | | | 277,960 | |
| | | | | | | | | | | �� | |
| | | | | | | | | | | 945,036 | |
| | | | | | | | | | | | |
AGENCY FIXED RATE–0.0% | | | | | | | | | | | | |
Federal National Mortgage Association REMICS Series 2010-117, Class DI 4.50%, 5/25/25(i) | | | | | | | 1,029 | | | | 113,359 | |
| | | | | | | | | | | | |
Total Collateralized Mortgage Obligations (cost $4,083,171) | | | | | | | | | | | 4,019,176 | |
| | | | | | | | | | | | |
QUASI- SOVEREIGNS–0.6% | | | | | | | | | | | | |
QUASI-SOVEREIGN BONDS–0.6% | | | | | | | | | | | | |
CHILE–0.1% | | | | | | | | | | | | |
Empresa de Transporte de Pasajeros Metro SA 4.75%, 2/04/24(c) | | | | | | | 340 | | | | 351,914 | |
| | | | | | | | | | | | |
CHINA–0.1% | | | | | | | | | | | | |
Sinopec Group Overseas Development 2013 Ltd. 4.375%, 10/17/23(c) | | | | | | | 480 | | | | 502,826 | |
| | | | | | | | | | | | |
MALAYSIA–0.2% | | | | | | | | | | | | |
Petronas Capital Ltd. 5.25%, 8/12/19(c) | | | | | | | 460 | | | | 509,546 | |
| | | | | | | | | | | | |
MEXICO–0.1% | | | | | | | | | | | | |
Petroleos Mexicanos 3.50%, 7/18/18-1/30/23 | | | | | | | 312 | | | | 311,140 | |
| | | | | | | | | | | | |
UNITED ARAB EMIRATES–0.1% | | | | | | | | | | | | |
IPIC GMTN Ltd. 3.75%, 3/01/17(c) | | | | | | | 465 | | | | 485,344 | |
| | | | | | | | | | | | |
Total Quasi-Sovereigns (cost $2,046,434) | | | | | | | | | | | 2,160,770 | |
| | | | | | | | | | | | |
GOVERNMENTS– SOVEREIGN AGENCIES–0.2% | | | | | | | | | | | | |
ISRAEL–0.1% | | | | | | | | | | | | |
Israel Electric Corp. Ltd. 5.00%, 11/12/24(c) | | | | | | | 320 | | | | 322,400 | |
CANADA – 0.1% | | | | | | | | | | | | |
NOVA Chemicals Corp. 5.25%, 8/01/23(c) | | | | | | | 125 | | | | 126,250 | |
24
| | |
|
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
COLOMBIA–0.0% | | | | | | | | | | | | |
Ecopetrol SA 5.875%, 5/28/45 | | | U.S.$ | | | | 94 | | | $ | 87,420 | |
| | | | | | | | | | | | |
Total Governments–Sovereign Agencies (cost $546,921) | | | | | | | | | | | 536,070 | |
| | | | | | | | | | | | |
LOCAL GOVERNMENTS–MUNICIPAL BONDS–0.2% | | | | | | | | | |
UNITED STATES–0.2% | | | | | | | | | | | | |
State of California (State of California) Series 2010 7.625%, 3/01/40 (cost $350,562) | | | | | | | 345 | | | | 529,575 | |
| | | | | | | | | | | | |
EMERGING MARKETS– CORPORATE BONDS – 0.1% | | | | | | | | | | | | |
INDUSTRIAL–0.1% | | | | | | | | | | | | |
COMMUNICATIONS– TELE- COMMUNICATIONS–0.1% | | | | | | | | | |
Comcel Trust via Comunicaciones Celulares SA 6.875%, 2/06/24 (c) | | | | | | | 200 | | | | 209,500 | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.0% | | | | | | | | | |
Marfrig Overseas Ltd. 9.50%, 5/04/20 (c) | | | | | | | 195 | | | | 196,950 | |
| | | | | | | | | | | | |
Total Emerging Markets–Corporate Bonds (cost $391,290) | | | | | | | | | | | 406,450 | |
| | | | | | | | | | | | |
| | | | | Shares | | | | |
PREFERRED STOCKS–0.1% | | | | | | | | | | | | |
Financial Institutions–0.1% | | | | | | | | | |
INSURANCE–0.1% | | | | | | | | | | | | |
Allstate Corp. (The) 5.10% (b) (cost $179,024) | | | | 6,700 | | | | 169,711 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SHORT-TERM INVESTMENTS–5.4% | | | | | | | | | |
TIME DEPOSIT–4.7% | | | | | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $17,106,880) | | | U.S.$ | | | | 17,107 | | | $ | 17,106,880 | |
| | | | | | | | | | | | |
CERTIFICATES OF DEPOSIT–0.7% | | | | | | | | | | | | |
Wells Fargo Bank NA 0.23%, 4/08/15 | | | | | | | 1,380 | | | | 1,380,000 | |
Svenska Handelsbanken/New York 0.225%, 3/23/15 | | | | | | | 1,313 | | | | 1,313,015 | |
| | | | | | | | | | | | |
Total Certificates of Deposit (cost $2,693,015) | | | | | | | | | | | 2,693,015 | |
| | | | | | | | | | | | |
Total Short-Term Investments (cost $19,799,895) | | | | | | | | | | | 19,799,895 | |
| | | | | | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–103.5% (cost $331,651,744) | | | | | | | | | | | 377,850,183 | |
| | | | | | | | | | | | |
| | | | | Shares | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–0.9% | | | | | | | | | | | | |
INVESTMENT COMPANIES–0.9% | | | | | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(j)(k) (cost $3,292,016) | | | | | | | 3,292,016 | | | | 3,292,016 | |
| | | | | | | | | | | | |
TOTAL INVESTMENTS–104.4% | | | | | | | | | |
(cost $334,943,760) | | | | | | | | | | | 381,142,199 | |
Other assets less liabilities–(4.4)% | | | | | | | | | | | (15,897,585 | ) |
| | | | | | | | | | | | |
NET ASSETS–100.0% | | | | | | | | | | $ | 365,244,614
| |
| | | | | | | | | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | | Original Value | | | Value at December 31, 2014 | | | Unrealized Appreciation/ (Depreciation) | |
Purchased Contracts | | | | | | | | | | | | | | | | | | | | |
U.S. Long Bond (CBT) Futures | | | 4 | | | | March 2015 | | | $ | 560,514 | | | $ | 578,250 | | | $ | 17,736 | |
U.S. T-Note 2 Yr (CBT) Futures | | | 3 | | | | March 2015 | | | | 655,832 | | | | 655,781 | | | | (51 | ) |
U.S. T-Note 5 Yr (CBT) Futures | | | 75 | | | | March 2015 | | | | 8,918,006 | | | | 8,919,727 | | | | 1,721 | |
25
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | | Original Value | | | Value at December 31, 2014 | | | Unrealized Appreciation/ (Depreciation) | |
| | | | | |
Sold Contracts | | | | | | | | | | | | | | | | | | | | |
U.S. T-Note 10 Yr (CBT) Futures | | | 32 | | | | March 2015 | | | $ | 4,032,204 | | | $ | 4,057,500 | | | $ | (25,296 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | (5,890 | ) |
| | | | | | | | | | | | | | | | | | | | |
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
BNP Paribas SA | | JPY | 400,000 | | | USD | 3,740 | | | | 1/15/15 | | | $ | 399,867 | |
BNP Paribas SA | | KRW | 297,805 | | | USD | 273 | | | | 2/17/15 | | | | 1,797 | |
BNP Paribas SA | | USD | 435 | | | AUD | 508 | | | | 2/18/15 | | | | (21,676 | ) |
Citibank | | CHF | 365 | | | USD | 372 | | | | 2/18/15 | | | | 5,017 | |
Citibank | | USD | 684 | | | AUD | 784 | | | | 2/18/15 | | | | (46,340 | ) |
Citibank | | USD | 580 | | | SEK | 4,284 | | | | 2/18/15 | | | | (30,422 | ) |
Deutsche Bank AG | | GBP | 870 | | | USD | 1,377 | | | | 2/18/15 | | | | 21,783 | |
Deutsche Bank AG | | CAD | 732 | | | USD | 636 | | | | 3/18/15 | | | | 7,473 | |
Goldman Sachs Bank USA | | BRL | 2,204 | | | USD | 830 | | | | 1/05/15 | | | | 625 | |
Goldman Sachs Bank USA | | USD | 830 | | | BRL | 2,204 | | | | 1/05/15 | | | | (1,000 | ) |
Goldman Sachs Bank USA | | EUR | 858 | | | USD | 1,077 | | | | 1/09/15 | | | | 38,934 | |
Goldman Sachs Bank USA | | BRL | 2,204 | | | USD | 823 | | | | 2/03/15 | | | | 341 | |
Goldman Sachs Bank USA | | JPY | 203,556 | | | USD | 1,782 | | | | 2/18/15 | | | | 81,673 | |
Goldman Sachs Bank USA | | AUD | 452 | | | USD | 373 | | | | 3/18/15 | | | | 5,619 | |
Goldman Sachs Bank USA | | JPY | 53,973 | | | USD | 476 | | | | 3/18/15 | | | | 25,479 | |
HSBC Bank USA | | HKD | 3,923 | | | USD | 506 | | | | 2/18/15 | | | | 144 | |
HSBC Bank USA | | JPY | 82,789 | | | USD | 723 | | | | 2/18/15 | | | | 31,106 | |
JPMorgan Chase Bank | | BRL | 1,853 | | | USD | 725 | | | | 1/05/15 | | | | 27,950 | |
JPMorgan Chase Bank | | USD | 698 | | | BRL | 1,853 | | | | 1/05/15 | | | | (524 | ) |
JPMorgan Chase Bank | | GBP | 545 | | | USD | 863 | | | | 2/18/15 | | | | 13,631 | |
Morgan Stanley & Co., Inc. | | BRL | 1,007 | | | USD | 372 | | | | 2/18/15 | | | | (1,939 | ) |
Royal Bank of Scotland PLC | | MXN | 10,050 | | | USD | 690 | | | | 1/15/15 | | | | 8,810 | |
Royal Bank of Scotland PLC | | USD | 1,294 | | | MXN | 17,745 | | | | 1/15/15 | | | | (92,437 | ) |
Royal Bank of Scotland PLC | | EUR | 502 | | | USD | 631 | | | | 2/18/15 | | | | 23,269 | |
Royal Bank of Scotland PLC | | USD | 861 | | | CHF | 825 | | | | 2/18/15 | | | | (30,216 | ) |
Royal Bank of Scotland PLC | | USD | 684 | | | NZD | 878 | | | | 2/18/15 | | | | (2,498 | ) |
Royal Bank of Scotland PLC | | EUR | 294 | | | USD | 370 | | | | 3/18/15 | | | | 13,620 | |
Royal Bank of Scotland PLC | | USD | 407 | | | NZD | 536 | | | | 3/18/15 | | | | 8,276 | |
Standard Chartered Bank | | KRW | 160,738 | | | USD | 149 | | | | 2/17/15 | | | | 1,870 | |
Standard Chartered Bank | | CNY | 3,289 | | | USD | 534 | | | | 2/18/15 | | | | 468 | |
Standard Chartered Bank | | USD | 518 | | | HKD | 4,015 | | | | 2/18/15 | | | | 128 | |
Standard Chartered Bank | | USD | 666 | | | SGD | 861 | | | | 2/18/15 | | | | (16,690 | ) |
State Street Bank & Trust Co. | | BRL | 352 | | | USD | 136 | | | | 1/05/15 | | | | 3,922 | |
State Street Bank & Trust Co. | | CAD | 743 | | | USD | 654 | | | | 1/14/15 | | | | 14,722 | |
State Street Bank & Trust Co. | | MXN | 17,619 | | | USD | 1,296 | | | | 1/15/15 | | | | 102,523 | |
State Street Bank & Trust Co. | | MXN | 4,578 | | | USD | 309 | | | | 1/15/15 | | | | (1,122 | ) |
State Street Bank & Trust Co. | | GBP | 177 | | | USD | 279 | | | | 1/27/15 | | | | 2,490 | |
State Street Bank & Trust Co. | | USD | 186 | | | GBP | 119 | | | | 1/27/15 | | | | (784 | ) |
State Street Bank & Trust Co. | | AUD | 204 | | | USD | 166 | | | | 2/18/15 | | | | (236 | ) |
26
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
State Street Bank & Trust Co. | | EUR | 868 | | | USD | 1,073 | | | | 2/18/15 | | | $ | 21,834 | |
State Street Bank & Trust Co. | | GBP | 210 | | | USD | 329 | | | | 2/18/15 | | | | 1,820 | |
State Street Bank & Trust Co. | | HKD | 14,946 | | | USD | 1,928 | | | | 2/18/15 | | | | 531 | |
State Street Bank & Trust Co. | | JPY | 40,780 | | | USD | 356 | | | | 2/18/15 | | | | 15,548 | |
State Street Bank & Trust Co. | | NOK | 1,546 | | | USD | 225 | | | | 2/18/15 | | | | 17,350 | |
State Street Bank & Trust Co. | | USD | 1,275 | | | AUD | 1,488 | | | | 2/18/15 | | | | (64,103 | ) |
State Street Bank & Trust Co. | | USD | 1,214 | | | CHF | 1,175 | | | | 2/18/15 | | | | (31,706 | ) |
State Street Bank & Trust Co. | | USD | 1,207 | | | EUR | 970 | | | | 2/18/15 | | | | (32,857 | ) |
State Street Bank & Trust Co. | | USD | 226 | | | GBP | 143 | | | | 2/18/15 | | | | (2,891 | ) |
State Street Bank & Trust Co. | | USD | 253 | | | JPY | 30,038 | | | | 2/18/15 | | | | (2,184 | ) |
State Street Bank & Trust Co. | | USD | 246 | | | NOK | 1,686 | | | | 2/18/15 | | | | (19,681 | ) |
State Street Bank & Trust Co. | | USD | 83 | | | NZD | 108 | | | | 2/18/15 | | | | 1,154 | |
State Street Bank & Trust Co. | | USD | 255 | | | SEK | 1,887 | | | | 2/18/15 | | | | (13,227 | ) |
State Street Bank & Trust Co. | | EUR | 412 | | | USD | 507 | | | | 3/18/15 | | | | 8,091 | |
State Street Bank & Trust Co. | | GBP | 253 | | | USD | 396 | | | | 3/18/15 | | | | 1,926 | |
State Street Bank & Trust Co. | | JPY | 21,125 | | | USD | 180 | | | | 3/18/15 | | | | 3,124 | |
State Street Bank & Trust Co. | | NOK | 1,045 | | | USD | 152 | | | | 3/18/15 | | | | 11,701 | |
State Street Bank & Trust Co. | | SEK | 1,828 | | | USD | 243 | | | | 3/18/15 | | | | 8,910 | |
State Street Bank & Trust Co. | | USD | 313 | | | CHF | 300 | | | | 3/18/15 | | | | (10,905 | ) |
State Street Bank & Trust Co. | | USD | 100 | | | NZD | 128 | | | | 3/18/15 | | | | (722 | ) |
UBS AG | | JPY | 48,988 | | | USD | 423 | | | | 2/18/15 | | | | 14,145 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 523,511 | |
| | | | | | | | | | | | | | | | |
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Clearing Broker/ (Exchange) & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at December 31, 2014 | | | Notional Amount (000) | | | Market Value | | | Unrealized Appreciation/ (Depreciation) | |
Buy Contracts | | | | | | | | | | | | | | | | | | | | |
Morgan Stanley & Co., LLC/(INTRCONX): | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 21, 5 Year Index, 12/20/18* | | | (5.00 | )% | | | 3.01 | % | | $ | 2,871 | | | $ | (208,092 | ) | | $ | (116,309 | ) |
CDX-NAIG Series 22, 5 Year Index, 6/20/19* | | | (1.00 | )% | | | 0.58 | % | | | 4,100 | | | | (74,875 | ) | | | (23,069 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | $ (282,967) | | | | $ (139,378) | |
| | | | | | | | | | | | | | | | | | | | |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | |
| | | | | | | Rate Type | | | |
Clearing Broker /(Exchange) | | Notional Amount (000) | | | Termination Date | | Payments made by the Fund | | Payments received by the Fund | | Unrealized Appreciation/ (Depreciation) | |
Morgan Stanley & Co., LLC/(CME Group) | | $ | 690 | | | 12/18/17 | | 1.164% | | 3 Month LIBOR | | $ | 1,923 | |
Morgan Stanley & Co., LLC/(CME Group) | | NZD | 1,810 | | | 9/25/19 | | 3 Month BKBM | | 4.390% | | | 42,571 | |
27
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | |
| | | | | | | Rate Type | | | |
Clearing Broker /(Exchange) | | Notional Amount (000) | | | Termination Date | | Payments made by the Fund | | Payments received by the Fund | | Unrealized Appreciation/ (Depreciation) | |
Morgan Stanley & Co., LLC/(CME Group) | | CAD | 2,160 | | | 10/03/19 | | 1.993% | | 3 Month CDOR | | $ | (24,081 | ) |
Morgan Stanley & Co., LLC/(CME Group) | | $ | 1,650 | | | 10/07/19 | | 3 Month LIBOR | | 1.935% | | | 22,283 | |
Morgan Stanley & Co., LLC/(CME Group) | | NZD | 1,220 | | | 9/25/24 | | 4.628% | | 3 Month BKBM | | | (51,774 | ) |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | $ | (9,078 | ) |
| | | | | | | | | | | | | | |
CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at December 31, 2014 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA: | | | | | | | | | | | | | | | | | | | | | | | | |
Anadarko Petroleum Corp. 5.95%, 9/15/16, 9/20/17* | | | 1.00 | % | | | 0.60 | % | | $ | 530 | | | $ | 6,931 | | | $ | (9,758 | ) | | $ | 16,689 | |
Credit Suisse International | | | | | | | | | | | | | | | | | | | | | | | | |
Kohl’s Corp., 6.25%, 12/15/17, 6/20/19* | | | 1.00 | | | | 0.84 | | | | 142 | | | | 920 | | | | (1,714 | ) | | | 2,634 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 7,851 | | | $ | (11,472 | ) | | $ | 19,323 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Rate Type | | | | |
Swap Counterparty | | Notional Amount (000) | | | Termination Date | | | Payments made by the Fund | | | Payments received by the Fund | | | Unrealized Appreciation/ (Depreciation) | |
JPMorgan Chase Bank | | $ | 1,970 | | | | 1/30/17 | | | | 1.059 | % | | | 3 Month LIBOR | | | $ | (13,087 | ) |
JPMorgan Chase Bank | | | 2,200 | | | | 2/07/22 | | | | 2.043 | % | | | 3 Month LIBOR | | | | (15,437 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | (28,524 | ) |
| | | | | | | | | | | | | | | | | | | | |
28
| | |
| | AllianceBernstein Variable Products Series Fund |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the aggregate market value of these securities amounted to $27,760,120 or 7.6% of net assets. |
(d) | | Fair valued by the Adviser. |
(f) | | Floating Rate Security. Stated interest rate was in effect at December 31, 2014. |
(g) | | Coupon rate adjusts periodically based upon a predetermined schedule. Stated interest rate in effect at December 31, 2014. |
(h) | | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(j) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
(k) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
Currency Abbreviations:
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
CHF—Swiss Franc
CNY—Chinese Yuan Renminbi
EUR—Euro
GBP—Great British Pound
HKD—Hong Kong Dollar
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
NOK—Norwegian Krone
NZD—New Zealand Dollar
SEK��Swedish Krona
SGD—Singapore Dollar
USD—United States Dollar
Glossary:
ABS—Asset-Backed Securities
ADR—American Depositary Receipt
BKBM—Bank Bill Benchmark (New Zealand)
CBT—Chicago Board of Trade
CDOR—Canadian Dealer Offered Rate
CDX-NAHY—North American High Yield Credit Default Swap Index
CDX-NAIG—North American Investment Grade Credit Default Swap Index
CMBS—Commercial Mortgage-Backed Securities
CME—Chicago Mercantile Exchange
GDR—Global Depositary Receipt
GSE—Government-Sponsored Enterprise
INTRCONX—Inter-Continental Exchange
LIBOR—London Interbank Offered Rates
REG—Registered Shares
REIT—Real Estate Investment Trust
TBA—To Be Announced
TIPS—Treasury Inflation Protected Security
See notes to financial statements.
29
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value Unaffiliated issuers (cost $331,651,744) | | $ | 377,850,183 | (a) |
Affiliated issuers (cost $3,292,016—investment of cash collateral for securities loaned) | | | 3,292,016 | |
Cash | | | 15,804 | |
Due from broker | | | 172,205 | (b) |
Foreign currencies, at value (cost $4,095,051) | | | 3,925,165 | |
Receivable for investment securities sold and foreign currency transactions | | | 2,440,163 | |
Interest and dividends receivable | | | 1,248,958 | |
Unrealized appreciation on forward currency exchange contracts | | | 947,671 | |
Receivable for capital stock sold | | | 180,445 | |
Unrealized appreciation on credit default swaps | | | 19,323 | |
Receivable for variation margin on exchange-traded derivatives | | | 5,025 | |
Receivable from class action settlement proceeds | | | 549 | |
| | | | |
Total assets | | | 390,097,507 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased and foreign currency transactions | | | 20,445,252 | |
Payable for collateral received on securities loaned | | | 3,292,016 | |
Unrealized depreciation on forward currency exchange contracts | | | 424,160 | |
Payable for capital stock redeemed | | | 225,977 | |
Advisory fee payable | | | 171,313 | |
Distribution fee payable | | | 69,971 | |
Unrealized depreciation on interest rate swaps | | | 28,524 | |
Administrative fee payable | | | 12,310 | |
Upfront premium received on credit default swaps | | | 11,472 | |
Payable for variation margin on exchange-traded derivatives | | | 2,297 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 169,489 | |
| | | | |
Total liabilities | | | 24,852,893 | |
| | | | |
NET ASSETS | | $ | 365,244,614 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 30,292 | |
Additional paid-in capital | | | 282,715,520 | |
Undistributed net investment income | | | 5,789,511 | |
Accumulated net realized gain on investment and foreign currency transactions | | | 30,335,972 | |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 46,373,319 | |
| | | | |
| | $ | 365,244,614 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 36,882,159 | | | | 3,032,593 | | | $ | 12.16 | |
B | | $ | 328,362,455 | | | | 27,259,335 | | | $ | 12.05 | |
(a) | | Includes securities on loan with a value of $3,131,803 (see Note E). |
(b) | | Represents amounts on deposit at the broker as collateral for open derivative contracts. |
| | See notes to financial statements. |
30
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $197,709) | | $ | 5,585,750 | |
Affiliated issuers | | | 1,843 | |
Interest | | | 4,478,604 | |
Securities lending income | | | 51,054 | |
Other income | | | 1,129 | |
| | | | |
| | | 10,118,380 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 2,088,276 | |
Distribution fee—Class B | | | 852,412 | |
Transfer agency—Class A | | | 676 | |
Transfer agency—Class B | | | 5,960 | |
Custodian | | | 263,765 | |
Printing | | | 99,811 | |
Audit and tax | | | 95,770 | |
Administrative | | | 49,439 | |
Legal | | | 41,666 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 43,874 | |
| | | | |
Total expenses | | | 3,546,152 | |
| | | | |
Net investment income | | | 6,572,228 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 36,693,770 | (a) |
Futures | | | 1,935 | |
Swaps | | | (129,524 | ) |
Foreign currency transactions | | | (570,128 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | (16,196,128 | ) |
Futures | | | (20,552 | ) |
Swaps | | | (127,112 | ) |
Foreign currency denominated assets and liabilities | | | 47,862 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 19,700,123 | |
| | | | |
Contributions from Adviser (see Note B) | | | 4,610 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 26,276,961 | |
| | | | |
(a) | | Net of foreign capital gains taxes of $17,592. |
| | See notes to financial statements. |
31
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
STATEMENT OF CHANGES IN NET ASSETS |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 6,572,228 | | | $ | 8,174,070 | |
Net realized gain on investment and foreign currency transactions | | | 35,996,053 | | | | 69,320,025 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | (16,295,930 | ) | | | 3,853,752 | |
Contributions from Adviser (see Note B) | | | 4,610 | | | | –0 | – |
| | | | | | | | |
Net increase in net assets from operations | | | 26,276,961 | | | | 81,347,847 | |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (1,044,211 | ) | | | (1,021,098 | ) |
Class B | | | (8,162,972 | ) | | | (11,602,037 | ) |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (5,792,408 | ) | | | –0 | – |
Class B | | | (52,203,889 | ) | | | –0 | – |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase (decrease) | | | 13,594,406 | | | | (226,090,311 | ) |
| | | | | | | | |
Total decrease | | | (27,332,113 | ) | | | (157,365,599 | ) |
NET ASSETS | | | | | | | | |
Beginning of period | | | 392,576,727 | | | | 549,942,326 | |
| | | | | | | | |
End of period (including undistributed net investment income of $5,789,511 and $8,255,542, respectively) | | $ | 365,244,614 | | | $ | 392,576,727 | |
| | | | | | | | |
See notes to financial statements.
32
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Balanced Wealth Strategy Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is to maximize total return consistent with the Adviser’s determination of reasonable risk. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
33
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
34
| | |
| | AllianceBernstein Variable Products Series Fund |
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stock: | | | | | | | | | | | | | | | | |
Financials | | $ | 24,078,717 | | | $ | 12,360,672 | | | $ | –0 | – | | $ | 36,439,389 | |
Consumer Discretionary | | | 23,234,952 | | | | 9,665,647 | | | | –0 | – | | | 32,900,599 | |
Information Technology | | | 28,862,967 | | | | 3,301,479 | | | | –0 | – | | | 32,164,446 | |
Health Care | | | 22,324,509 | | | | 4,671,177 | | | | –0 | – | | | 26,995,686 | |
Industrials | | | 12,952,478 | | | | 9,786,005 | | | | –0 | – | | | 22,738,483 | |
Consumer Staples | | | 12,974,140 | | | | 2,801,387 | | | | –0 | – | | | 15,775,527 | |
Equity: Other | | | 5,893,895 | | | | 6,996,761 | | | | –0 | – | | | 12,890,656 | |
Energy | | | 10,246,274 | | | | 1,939,018 | | | | –0 | – | | | 12,185,292 | |
Retail | | | 4,969,838 | | | | 3,475,067 | | | | –0 | – | | | 8,444,905 | |
Residential | | | 3,225,910 | | | | 3,048,067 | | | | 83,861 | | | | 6,357,838 | |
Utilities | | | 4,835,744 | | | | 669,087 | | | | –0 | – | | | 5,504,831 | |
Materials | | | 1,978,289 | | | | 3,515,885 | | | | –0 | – | | | 5,494,174 | |
Telecommunication Services | | | 2,064,160 | | | | 3,023,571 | | | | –0 | – | | | 5,087,731 | |
Office | | | 2,029,308 | | | | 2,073,712 | | | | –0 | – | | | 4,103,020 | |
Lodging | | | 2,501,732 | | | | 161,666 | | | | –0 | – | | | 2,663,398 | |
Financial: Other | | | 304,602 | | | | –0 | – | | | –0 | – | | | 304,602 | |
Mortgage | | | –0 | – | | | 172,702 | | | | –0 | – | | | 172,702 | |
Corporates—Investment Grade | | | –0 | – | | | 32,511,189 | | | | –0 | – | | | 32,511,189 | |
Governments—Treasuries | | | –0 | – | | | 23,950,984 | | | | –0 | – | | | 23,950,984 | |
Mortgage Pass-Throughs | | | –0 | – | | | 23,074,342 | | | | –0 | – | | | 23,074,342 | |
Asset-Backed Securities | | | –0 | – | | | 15,940,465 | | | | 2,438,554 | | | | 18,379,019 | |
Commercial Mortgage-Backed Securities | | | –0 | – | | | 10,107,756 | | | | 2,402,381 | | | | 12,510,137 | |
Corporates—Non-Investment Grade | | | –0 | – | | | 5,484,568 | | | | –0 | – | | | 5,484,568 | |
Inflation-Linked Securities | | | –0 | – | | | 4,095,017 | | | | –0 | – | | | 4,095,017 | |
Collateralized Mortgage Obligations | | | –0 | – | | | 113,359 | | | | 3,905,817 | | | | 4,019,176 | |
Quasi-Sovereigns | | | –0 | – | | | 2,160,770 | | | | –0 | – | | | 2,160,770 | |
Governments—Sovereign Agencies | | | –0 | – | | | 536,070 | | | | –0 | – | | | 536,070 | |
Local Governments—Municipal Bonds | | | –0 | – | | | 529,575 | | | | –0 | – | | | 529,575 | |
Emerging Markets—Corporate Bonds | | | –0 | – | | | 406,450 | | | | –0 | – | | | 406,450 | |
Preferred Stocks | | | 169,711 | | | | –0 | – | | | –0 | – | | | 169,711 | |
Short-Term Investments: | | | | | | | | | | | | | | | | |
Time Deposits | | | –0 | – | | | 17,106,880 | | | | –0 | – | | | 17,106,880 | |
Certificates of Deposits | | | –0 | – | | | 2,693,015 | | | | –0 | – | | | 2,693,015 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 3,292,016 | | | | –0 | – | | | –0 | – | | | 3,292,016 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 165,939,242 | | | | 206,372,343 | | | | 8,830,613 | | | | 381,142,198 | |
Other Financial Instruments*: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Futures | | | 19,457 | | | | –0 | – | | | –0 | – | | | 19,457 | # |
Forward Currency Exchange Contracts | | | –0 | – | | | 947,671 | | | | –0 | – | | | 947,671 | |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | 66,777 | | | | –0 | – | | | 66,777 | # |
Credit Default Swaps | | | –0 | – | | | 19,323 | | | | –0 | – | | | 19,323 | |
Liabilities: | | | | | | | | | | | | | | | | |
Futures | | | (25,347 | ) | | | –0 | – | | | –0 | – | | | (25,347 | )# |
Forward Currency Exchange Contracts | | | –0 | – | | | (424,160 | ) | | | –0 | – | | | (424,160 | ) |
Centrally Cleared Credit Default Swaps | | | –0 | – | | | (139,378 | ) | | | –0 | – | | | (139,378 | )# |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | (75,855 | ) | | | –0 | – | | | (75,855 | )# |
Interest Rate Swaps | | | –0 | – | | | (28,524 | ) | | | –0 | – | | | (28,524 | ) |
| | | | | | | | | | | | | | | | |
Total+ | | $ | 165,933,352 | | | $ | 206,738,197 | | | $ | 8,830,613 | | | $ | 381,502,162 | |
| | | | | | | | | | | | | | | | |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
35
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
# | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/depreciation of exchange traded derivatives reported in the portfolio of investments. |
+ | | There were de minimis transfers under 1% of net assets between Level 1 and Level 2 during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.
| | | | | | | | | | | | |
| | Common Stocks | | | Asset-Backed Securities | | | Commercial Mortgage-Backed Securities | |
Balance as of 12/31/13 | | $ | –0 | – | | $ | 2,233,195 | | | $ | 845,923 | |
Accrued discounts/(premiums) | | | –0 | – | | | 6,363 | | | | (5,129 | ) |
Realized gain (loss) | | | –0 | – | | | 7,769 | | | | 3,442 | |
Change in unrealized appreciation/depreciation | | | (76,336 | ) | | | (12,375 | ) | | | (60,357 | ) |
Purchases | | | 160,197 | | | | 1,762,897 | | | | 1,861,483 | |
Sales | | | –0 | – | | | (1,559,295 | ) | | | (242,981 | ) |
Transfers in to Level 3 | | | –0 | – | | | –0 | – | | | –0 | – |
Transfers out of Level 3 | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | |
Balance as of 12/31/14 | | $ | 83,861 | | | $ | 2,438,554 | | | $ | 2,402,381 | |
| | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from Investments held as of 12/31/14 * | | $ | (76,336 | ) | | $ | (11,300 | ) | | $ | (58,889 | ) |
| | | | | | | | | | | | |
| | | |
| | Collateralized Mortgage Obligation | | | Total | | | | |
Balance as of 12/31/13 | | $ | 1,527,063 | | | $ | 4,606,181 | | | | | |
Accrued discounts/(premiums) | | | 18,528 | | | | 19,762 | | | | | |
Realized gain (loss) | | | 720 | | | | 11,931 | | | | | |
Change in unrealized appreciation/depreciation | | | 254 | | | | (148,814 | ) | | | | |
Purchases | | | 2,591,052 | | | | 6,375,629 | | | | | |
Sales | | | (231,800 | ) | | | (2,034,076 | ) | | | | |
Transfers in to Level 3 | | | –0 | – | | | –0 | – | | | | |
Transfers out of Level 3 | | | –0 | – | | | –0 | – | | | | |
| | | | | | | | | | | | |
Balance as of 12/31/14* | | $ | 3,905,817 | | | $ | 8,830,613 | | | | | |
| | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from Investments held as of 12/31/14 | | $ | 286 | | | $ | (146,239 | ) | | | | |
| | | | | | | | | | | | |
* | | The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation of investments in the accompanying statement of operations. |
As of December 31, 2014 all Level 3 securities were priced by third party vendors.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity
36
| | |
| | AllianceBernstein Variable Products Series Fund |
determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
37
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BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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.
8. Repurchase Agreements
It is the Portfolio’s policy that its custodian or designated subcustodian take control of securities as collateral under repurchase agreements and to determine on a daily basis that the value of such securities are sufficient to cover the value of the repurchase agreements. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of collateral by the Portfolio may be delayed or limited.
NOTE B: Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to .75% and 1.00% of daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2014, there were no expenses waived by the Adviser.
During the year ended December 31, 2014, the Adviser reimbursed the Portfolio $4,610 for trading losses incurred due to a trade entry error.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $49,439.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $245,755, of which $185 and $75, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
38
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| | AllianceBernstein Variable Products Series Fund |
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 186,634,377 | | | $ | 223,414,558 | |
U.S. government securities | | | 239,286,807 | | | | 244,733,975 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding futures, swaps and foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 337,350,741 | |
| | | | |
Gross unrealized appreciation | | $ | 52,696,368 | |
Gross unrealized depreciation | | | (8,904,910 | ) |
| | | | |
Net unrealized appreciation | | $ | 43,791,458 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:
The Portfolio may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Portfolio bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Portfolio may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Portfolio enters into futures, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Portfolio to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Portfolio to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended December 31, 2014, the Portfolio held futures for hedging and non-hedging purposes.
| • | | Forward Currency Exchange Contracts |
The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
39
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Portfolio. 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.
During the year ended December 31, 2014, the Portfolio held forward currency exchange contracts for hedging purposes.
The Portfolio may enter into swaps to hedge its exposure to interest rates, credit risk, or currencies. The Portfolio may also enter into swaps for non-hedging purposes as a means of gaining market exposures, including by making direct investments in foreign currencies, as described below under “Currency Transactions”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Portfolio in accordance with the terms of the respective swaps to provide value and recourse to the Portfolio or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by the posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Portfolio enters into a centrally cleared swap, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for swaps cleared through a central clearinghouse’s exchange is generally less than privately negotiated swaps, since the clearinghouse, which is the issuer or counterparty to each exchange-traded swap, has
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| | AllianceBernstein Variable Products Series Fund |
robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Portfolio holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Portfolio may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Portfolio may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Portfolio may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Portfolio with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended December 31, 2014, the Portfolio held interest rate swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Portfolio may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Portfolio, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Portfolio may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Portfolio receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Portfolio is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Portfolio will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Portfolio for the same reference obligation with the same counterparty. As of December 31, 2014, the Portfolio did not have Buy Contracts outstanding with respect to the same referenced obligation and same counterparty for its Sale Contracts outstanding.
Credit default swaps may involve greater risks than if a Portfolio had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Portfolio is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Portfolio is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Portfolio.
During the year ended December 31, 2014, the Portfolio held credit default swaps for hedging and non-hedging purposes.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the
41
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolio and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
The Portfolio’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
At December 31, 2014, the Portfolio had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Interest rate contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 86,234 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 101,202 | * |
Credit contracts | | | | | | | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 139,378 | * |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | | 947,671 | | | Unrealized depreciation on forward currency exchange contracts | | | 424,160 | |
Interest rate contracts | | | | | | | | Unrealized depreciation on interest rate swaps | | | 28,524 | |
Credit contracts | | Unrealized appreciation on credit default swaps | | | 19,323 | | | | | | | |
| | | | | | | | | | | | |
Total | | | | $ | 1,053,228 | | | | | $ | 693,264 | |
| | | | | | | | | | | | |
* | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
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| | AllianceBernstein Variable Products Series Fund |
The effect of derivative instruments on the statement of operations for the year ended December 31, 2014:
| | | | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Interest rate contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | $ | (1,483 | ) | | $ | (5,890 | ) |
Equity contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | | 3,418 | | | | (14,662 | ) |
Foreign exchange contracts | | Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities | | | 155,364 | | | | 235,643 | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (13,969 | ) | | | (119,508 | ) |
Credit contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (115,555 | ) | | | (7,604 | ) |
| | | | | | | | | | | | |
Total | | | | $ | 27,775 | | | $ | 87,979 | |
| | | | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2014:
| | | | |
Futures: | | | | |
Average original value of buy contracts | | $ | 4,944,021 | |
Average original value of sale contracts | | $ | 6,090,112 | (a) |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 22,864,117 | |
Average principal amount of sale contracts | | $ | 31,442,679 | |
Interest Rate Swaps: | | | | |
Average notional amount | | $ | 4,170,000 | |
Centrally Cleared Interest Rate Swaps: | | | | |
Average notional amount | | $ | 5,282,592 | (b) |
Credit Default Swaps: | | | | |
Average notional amount of sale contracts | | $ | 617,252 | |
Centrally Cleared Credit Default Swaps: | | | | |
Average notional amount of buy contracts | | $ | 6,346,000 | |
(a) | | Positions were open for nine months during the year. |
(b) | | Positions were open for six months during the year. |
For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
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| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
All derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Portfolio as of December 31, 2014:
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Received | | | Security Collateral Received | | | Net Amount of Derivatives Assets | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Goldman Sachs & Co** | | $ | 5,025 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 5,025 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 5,025 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 5,025 | |
| | | | | | | | | | | | | | | | | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA | | $ | 408,595 | | | $ | (21,676 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 386,919 | |
Citibank | | | 5,017 | | | | (5,017 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Credit Suisse International | | | 920 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 920 | |
Deutsche Bank AG | | | 29,256 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 29,256 | |
Goldman Sachs Bank USA | | | 152,671 | | | | (1,000 | ) | | | –0 | – | | | –0 | – | | | 151,671 | |
HSBC Bank USA | | | 31,250 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 31,250 | |
JPMorgan Chase Bank | | | 41,581 | | | | (29,048 | ) | | | –0 | – | | | –0 | – | | | 12,533 | |
Royal Bank of Scotland PLC | | | 53,975 | | | | (53,975 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Standard Chartered Bank | | | 2,466 | | | | (2,466 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 215,646 | | | | (180,418 | ) | | | –0 | – | | | –0 | – | | | 35,228 | |
UBS AG | | | 14,145 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 14,145 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 955,522 | | | $ | (293,600 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 661,922 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Pledged* | | | Security Collateral Pledged | | | Net Amount of Derivatives Liabilities | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Morgan Stanley & Co., LLC** | | $ | 2,297 | | | $ | –0 | – | | $ | (2,297 | ) | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,297 | | | $ | –0 | – | | $ | (2,297 | ) | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA | | $ | 21,676 | | | $ | (21,676 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
Citibank | | | 76,762 | | | | (5,017 | ) | | | –0 | – | | | –0 | – | | | 71,745 | |
Goldman Sachs Bank USA | | | 1,000 | | | | (1,000 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank | | | 29,048 | | | | (29,048 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley & Co., Inc. | | | 1,939 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 1,939 | |
Royal Bank of Scotland PLC | | | 125,151 | | | | (53,975 | ) | | | –0 | – | | | –0 | – | | | 71,176 | |
Standard Chartered Bank | | | 16,690 | | | | (2,466 | ) | | | –0 | – | | | –0 | – | | | 14,224 | |
State Street Bank & Trust Co. | | | 180,418 | | | | (180,418 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 452,684 | | | $ | (293,600 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 159,084 | ^ |
| | | | | | | | | | | | | | | | | | | | |
* | | The actual collateral received/pledged may be more than the amount reported due to overcollateralization. |
** | | Cash has been posted for initial margin requirements for exchange traded derivatives outstanding at December 31, 2014. |
^ | | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment
44
| | |
| | AllianceBernstein Variable Products Series Fund |
opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. Dollar Rolls
The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the Portfolio of securities for delivery in the current month and the Portfolio’s simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Portfolio is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques. For the year ended December 31, 2014, the Portfolio earned drop income of $484,121 which is included in interest income in the accompanying statement of operations.
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $3,131,803 and had received cash collateral which has been invested into AB Exchange Reserves of $3,292,016. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $51,054 and $1,843 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 2,813 | | | $ | 41,618 | | | $ | 41,139 | | | $ | 3,292 | |
45
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 33,121 | | | | 80,998 | | | | | $ | 438,040 | | | $ | 1,056,312 | |
Shares issued in reinvestment of dividends and distributions | | | 571,624 | | | | 79,898 | | | | | | 6,836,617 | | | | 1,021,098 | |
Shares redeemed | | | (564,980 | ) | | | (616,652 | ) | | | | | (7,527,554 | ) | | | (7,969,589 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 39,765 | | | | (455,756 | ) | | | | $ | (252,897 | ) | | $ | (5,892,179 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 2,052,551 | | | | 4,378,738 | | | | | $ | 26,889,806 | | | $ | 56,132,152 | |
Shares issued in reinvestment of dividends and distributions | | | 5,089,954 | | | | 914,987 | | | | | | 60,366,861 | | | | 11,602,037 | |
Shares redeemed | | | (5,629,147 | ) | | | (21,843,744 | ) | | | | | (73,409,364 | ) | | | (287,932,321 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 1,513,358 | | | | (16,550,019 | ) | | | | $ | 13,847,303 | | | $ | (220,198,132 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Interest Rate Risk and Credit Risk—Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio’s investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio’s investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as “junk bonds”) have speculative elements or are predominantly speculative risks.
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
46
| | |
| | AllianceBernstein Variable Products Series Fund |
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 12,624,188 | | | $ | 12,623,135 | |
Net long-term capital gains | | | 54,579,292 | | | | –0 | – |
| | | | | | | | |
Total taxable distributions paid | | $ | 67,203,480 | | | $ | 12,623,135 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 9,435,504 | |
Undistributed capital gains | | | 29,655,522 | |
Accumulated capital and other losses | | | (162,766 | )(a) |
Unrealized appreciation/(depreciation) | | | 43,570,541 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 82,498,801 | |
| | | | |
(a) | | As of December 31, 2014, the Portfolio had cumulative deferred losses on straddles of $162,766. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the tax treatment of swaps, partnerships, passive foreign investment companies (PFICs) and Treasury inflation-protected securities, the realization for tax purposes of gains/losses on certain derivative instruments, and the tax treatment of corporate restructurings. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to reclassifications of foreign currency and foreign capital gains tax, the tax treatment of swaps, partnerships and passive foreign investment companies (PFICs), paydown gain/loss reclassification and the tax treatment of corporate restructurings and clearing fees resulted in a net increase in undistributed net investment income and a net decrease in accumulated net realized gain on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
47
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| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $13.77 | | | | $12.12 | | | | $10.90 | | | | $11.48 | | | | $10.66 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .26 | | | | .23 | | | | .22 | | | | .23 | | | | .23 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .71 | | | | 1.74 | | | | 1.25 | | | | (.53 | ) | | | .88 | |
Contributions from Adviser | | | .00 | (b) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .97 | | | | 1.97 | | | | 1.47 | | | | (.30 | ) | | | 1.11 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.39 | ) | | | (.32 | ) | | | (.25 | ) | | | (.28 | ) | | | (.29 | ) |
Distributions from net realized gain on investment transactions | | | (2.19 | ) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (2.58 | ) | | | (.32 | ) | | | (.25 | ) | | | (.28 | ) | | | (.29 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $12.16 | | | | $13.77 | | | | $12.12 | | | | $10.90 | | | | $11.48 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c) | | | 7.37 | %* | | | 16.49 | % | | | 13.63 | % | | | (2.81 | )%* | | | 10.61 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $36,882 | | | | $41,222 | | | | $41,801 | | | | $55,395 | | | | $68,914 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .71 | % | | | .65 | % | | | .65 | % | | | .66 | % | | | .68 | %+ |
Net investment income | | | 1.96 | % | | | 1.76 | % | | | 1.91 | % | | | 2.03 | % | | | 2.14 | %+ |
Portfolio turnover rate** | | | 114 | % | | | 117 | % | | | 90 | % | | | 94 | % | | | 101 | % |
See footnote summary on page 49.
48
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|
| | |
| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $13.65 | | | | $12.01 | | | | $10.80 | | | | $11.38 | | | | $10.58 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .22 | | | | .19 | | | | .19 | | | | .20 | | | | .20 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .71 | | | | 1.74 | | | | 1.24 | | | | (.53 | ) | | | .87 | |
Contributions from Adviser | | | .00 | (b) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .93 | | | | 1.93 | | | | 1.43 | | | | (.33 | ) | | | 1.07 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.34 | ) | | | (.29 | ) | | | (.22 | ) | | | (.25 | ) | | | (.27 | ) |
Distributions from net realized gain on investment and foreign currency transactions | | | (2.19 | ) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (2.53 | ) | | | (.29 | ) | | | (.22 | ) | | | (.25 | ) | | | (.27 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $12.05 | | | | $13.65 | | | | $12.01 | | | | $10.80 | | | | $11.38 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c) | | | 7.11 | %* | | | 16.27 | % | | | 13.38 | % | | | (3.06 | )%* | | | 10.30 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $328,363 | | | | $351,355 | | | | $508,141 | | | | $483,047 | | | | $518,572 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .96 | % | | | .90 | % | | | .90 | % | | | .91 | % | | | .93 | %+ |
Net investment income | | | 1.71 | % | | | 1.49 | % | | | 1.67 | % | | | 1.78 | % | | | 1.89 | %+ |
Portfolio turnover rate** | | | 114 | % | | | 117 | % | | | 90 | % | | | 94 | % | | | 101 | % |
(a) | | Based on average shares outstanding. |
(b) | | Amount is less than $.005. |
(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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2011 and December 31, 2010 by 0.01%, 0.02% and 0.03%, respectively. |
** | | The Portfolio accounts for dollar roll transactions as purchases and sales. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
49
| | |
| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Balanced Wealth Strategy Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Balanced Wealth Strategy Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Balanced Wealth Strategy Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
50
| | |
| | |
| | |
2014 TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 21.30% of dividends paid qualify for the dividends received deduction.
51
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| | |
BALANCED WEALTH | | |
STRATEGY PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman | | Nancy P. Jacklin(1) |
John H. Dobkin(1) | | Robert M. Keith, President and Chief Executive Officer |
Michael J. Downey(1) | | Garry L. Moody(1) |
William H. Foulk, Jr.(1) | | Earl D. Weiner(1) |
D. James Guzy(1) | | |
| | |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Daniel J. Loewy(2), Vice President Christopher H. Nikolich(2), Vice President Patrick J. Rudden(2), Vice President Vadim Zlotnikov(2), Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Multi-Asset Solutions Team, comprised of senior portfolio managers. Significant day-to-day responsibilities for coordinating the Portfolio’s investments reside with Messrs. Daniel J. Loewy, Christopher H. Nikolich, Patrick J. Rudden and Vadim Zlotnikov. |
52
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| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | | | |
| | | | | | | | |
Robert M. Keith, #
1345 Avenue of the Americas
New York, NY 10105
54
(2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ##
Chairman of the Board
73
(2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007 and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ##
73
(1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999–June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989–May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
53
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
MANAGEMENTOFTHE FUND |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ##
71
(2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ##
82
(1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ##
78
(2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ##
66
(2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
54
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ##
62
(2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ##
75
(2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund as defined in the “1940 Act”, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
55
| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Daniel J. Loewy 40 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Christopher H. Nikolich 45 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Patrick J. Rudden 52 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Vadim Zlotnikov 52 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of the ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABI, and ABIS are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
56
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BALANCED WEALTH STRATEGY PORTFOLIO |
CONTINUANCE DISCLOSURE | | AllianceBernstein Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE PORTFOLIO’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”) unanimously approved the continuance of the Fund’s Advisory Agreement with the Adviser in respect of AllianceBernstein Balanced Wealth Strategy Portfolio (the “Portfolio”) at a meeting held on August 4-7, 2014.
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed an independent evaluation prepared by the Fund’s Senior Officer (who is also the Fund’s Independent Compliance Officer) of the reasonableness of the advisory fee, in which the Senior Officer concluded that the contractual fee for the Portfolio was reasonable. The directors also discussed the proposed continuance in private sessions with counsel and the Fund’s Senior Officer.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Portfolio gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. The directors noted that they have four regular meetings each year, at each of which they receive presentations from the Adviser on the investment results of the Portfolio and review extensive materials and information presented by the Adviser.
The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Portfolio and the overall arrangements between the Portfolio and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Portfolio. They noted the professional experience and qualifications of the Portfolio’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Portfolio will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Portfolio by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Portfolio to the Adviser than the fee rate stated in the Portfolio’s Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s Senior Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Portfolio’s other service providers, also were considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Portfolio under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Portfolio to the Adviser for calendar years 2012 and 2013 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s Senior Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Portfolio, including those relating to its subsidiaries which provide transfer agency, distribution and brokerage services to the Portfolio. The directors recognized that it is difficult to make comparisons of profitability of the Advisory Agreement with advisory contracts for unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors
57
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BALANCED WEALTH STRATEGY PORTFOLIO |
CONTINUANCE DISCLOSURE | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
focused on the profitability of the Adviser’s relationship with the Portfolio before taxes and distribution expenses. The directors concluded that they were satisfied that the Adviser’s level of profitability from its relationship with the Portfolio was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Portfolio, including but not limited to benefits relating to soft dollar arrangements (whereby the Adviser receives brokerage and research services from brokers that execute transactions for certain clients, including the Portfolio); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of the Portfolio’s Class B shares; transfer agency fees paid by the Portfolio to a wholly owned subsidiary of the Adviser; and brokerage commissions paid by the Portfolio to brokers affiliated with the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors also understood that the Adviser also might derive reputational and other benefits from its association with the Portfolio.
Investment Results
In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for the Portfolio at each regular Board meeting during the year. At the August 2014 meeting, the directors reviewed information prepared by Lipper showing the performance of the Class A Shares of the Portfolio as compared with that of a group of similar funds selected by Lipper (the “Performance Group”) and as compared with that of a broader array of funds selected by Lipper (the “Performance Universe”), and information prepared by the Adviser showing performance of the Class A Shares as compared with the Standard & Poor’s (S&P) 500 Index, the Barclays U.S. Aggregate Bond Index and the Portfolio’s blended benchmark (60% S&P 500 Index/40% Barclays U.S. Aggregate Bond Index), in each case for the 1-, 3- and 5-year periods ended May 31, 2014 and (in the case of comparisons with the indices) the since inception period (July 2004 inception). The directors noted that the Portfolio was in the 3rd quintile of the Performance Group and the Performance Universe for the 1-year period, in the 5th quintile of the Performance Group and the 4th quintile of the Performance Universe for the 3-year period, and in the 4th quintile of the Performance Group and the Performance Universe for the 5-year period. The Portfolio outperformed the Barclays U.S. Aggregate Bond Index in all periods. It lagged the S&P 500 Index in all periods and its blended benchmark in all periods except the 1-year period. Based on their review, the directors concluded that the Portfolio’s recent performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Portfolio to the Adviser and information prepared by Lipper concerning advisory fee rates paid by other funds in the same Lipper category as the Portfolio at a common asset level. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors noted that, at the Portfolio’s current size, its contractual effective advisory fee rate of 55 basis points was the same as the Expense Group median. The directors noted that the administrative expense reimbursement was 1 basis point in the Portfolio’s latest fiscal year, and that as a result the rate of total compensation received by the Adviser pursuant to the Advisory Agreement was more than the Expense Group median.
The Adviser informed the directors that there were no institutional products managed by it that have a substantially similar investment style. The directors reviewed the relevant advisory fee information from the Adviser’s Form ADV and noted that the Adviser charged institutional clients lower fees for advising comparably sized institutional accounts using strategies that differ from those of the Portfolio but which invest in equity and debt securities. The directors also noted that the Adviser advises a portfolio of another AllianceBernstein fund with a similar investment style for the same fee schedule as the Portfolio.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Portfolio relative to institutional clients. The Adviser also noted that because mutual funds are constantly issuing and redeeming shares, they are more difficult to manage than an institutional account, where the assets tend to be relatively stable. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Portfolio, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors also considered the total expense ratio of the Class A shares of the Portfolio in comparison to the fees and expenses of funds within two comparison groups created by Lipper: an Expense Group and an Expense Universe. Lipper described an Expense Group as a representative sample of funds comparable to the Portfolio and an Expense Universe as a broader group, consisting of all funds in the Portfolio’s investment classification/objective. The Class A expense ratio of the Portfolio was based on the Portfolio’s latest fiscal year. The directors noted that it was likely that the expense ratios of some
58
| | |
| | AllianceBernstein Variable Products Series Fund |
of the other funds in the Portfolio’s Lipper category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view the expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Portfolio by others.
The directors noted that the Portfolio’s total expense ratio, which had been capped by the Adviser (although the expense ratio was currently lower than the cap), was higher than the Expense Group median and lower than the Expense Universe median. After discussing with the Adviser the reasons for the Portfolio’s expense ratio, the directors concluded that the Portfolio’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Portfolio contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AllianceBernstein Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale at the May 2014 meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Portfolio, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Portfolio’s shareholders would benefit from a sharing of economies of scale in the event the Portfolio’s net assets exceed a breakpoint in the future.
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| | |
BALANCED WEALTH STRATEGY PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Balanced Wealth Strategy Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by the August 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement.
The Senior Officer’s evaluation considered the following factors:
| 1. | Management fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Management fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the Assurance of Discontinuance between the NYAG and the Adviser. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what Section 36(b) requires: to face liability under Section 36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of Section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.4
1 | | The information in the fee evaluation was completed on July 24, 2014 and discussed with the Board of Directors on August 5-7, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratios refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
4 | | Most of the AllianceBernstein Mutual Funds, which the Adviser manages, were affected by the Adviser’s settlement with the NYAG. |
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | |
Portfolio | | Net Assets 06/30/14 ($MM) | | Advisory Fee Based on % of Average Daily Net Assets | | Category |
Balanced Wealth Strategy Portfolio | | $388.5 | | 0.55% on 1st $2.5 billion | | Balanced |
| | | 0.45% on next $2.5 billion | | |
| | | | 0.40% on the balance | | |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $55,156 (0.010% of the Portfolio’s average daily net assets) for providing such services.
The Adviser agreed to waive that portion of its management fees and/or reimburse the Portfolio for that portion of its total operating expenses to the degree necessary to limit the Portfolio’s expense ratios to the amounts set forth below for the Portfolio’s current fiscal year. The agreement for such reimbursement is terminable by the Adviser upon at least 60 days’ notice prior to the Portfolio’s prospectus update. All share classes of the Portfolio were operating below their expense caps during the most recently completed fiscal year. Accordingly, the expense limitation was of no effect. Set forth below are the Portfolio’s gross expense ratios for the most recently completed fiscal year:
| | | | | | | | |
Portfolio | | Expense Cap Pursuant to Expense Limitation Undertaking | | Gross Expense Ratio (12/31/13) | | | Fiscal Year End |
Balanced Wealth Strategy Portfolio | | Class A 0.75% | | | 0.65% | | | December 31 |
| Class B 1.00% | | | 0.90% | | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. Finally, in recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.5 However, the Adviser represented that there is no category in the Form ADV for institutional products that has a similar investment style as the Portfolio.
5 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
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BALANCED WEALTH STRATEGY PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser manages The AllianceBernstein Portfolios – Balanced Wealth Strategy (“TAP – Balanced Wealth Strategy”), a retail mutual fund which has a substantially similar investment style as the Portfolio.6 The Adviser also manages AllianceBernstein Global Risk Allocation Fund, Inc. (“Global Risk Allocation Fund, Inc.”), a retail mutual fund in the Balanced category. The advisory fee schedules of TAP – Balanced Wealth Strategy and Global Risk Allocation Fund, Inc. are shown in the table below.7
| | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule |
Balanced Wealth Strategy Portfolio | | TAP—Balanced Wealth Strategy | | 0.55% on first $2.5 billion 0.45% on next $2.5 billion 0.40% on the balance |
| | |
| | Global Risk Allocation Fund, Inc.8 | | 0.60% on first $200 million 0.50% on next $200 million 0.40% on the balance |
The AllianceBernstein Investment Trust Management mutual funds (“ITM”), which are offered to investors in Japan, have an “all-in” fee to compensate the Adviser for investment advisory as well as fund accounting and administrative services, but not for distribution services. The fee schedule of the ITM mutual fund that has a somewhat similar investment style as the Portfolio is as follows:
| | | | | | |
Portfolio | | ITM Mutual Fund | | Fee | |
Balanced Wealth Strategy Portfolio | | Alliance Global Balance Neutral9 | | | 0.70% | |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Portfolio.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.10 Lipper’s analysis included the Portfolio’s contractual management fee11 estimated at the approximate current asset level of the Portfolio to the median of the Portfolio’s Lipper Expense Group (“EG”)12.
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
6 | | The AllianceBernstein Mutual Fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the AllianceBernstein Mutual Fund. |
7 | | There was no change to the advisory fee schedule of AllianceBernstein Global Risk Allocation Fund, Inc. since the retail mutual fund had already lower breakpoints than that of the NYAG related category. |
8 | | Prior to October 8, 2012, AllianceBernstein Global Risk Allocation Fund, Inc. was known as AllianceBernstein Balanced Shares, Inc. and had a different investment strategy that was similar to the Portfolio. The advisory fee schedule of the retail mutual fund was not affected by the NYAG settlement since the retail mutual fund had lower breakpoints than that of the NYAG related category |
9 | | This ITM is privately placed or institutional. |
10 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of the negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
11 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
12 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratios than comparable sized funds that have relatively large average account sizes. In addition, there are limitations in Lipper’s expense category data because different funds categorize expenses differently. |
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee13 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Balanced Wealth Strategy Portfolio | | | 0.550 | | | | 0.550 | | | | 4/11 | |
Lipper also compared the Portfolio’s most recently completed fiscal year total expense ratio to the medians of the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.14
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Portfolio | | Total Expense Ratio (%)15 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Balanced Wealth Strategy Portfolio | | | 0.653 | | | | 0.593 | | | | 7/11 | | | | 0.662 | | | | 16/32 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter and distributor, AllianceBernstein Investments, Inc. (“ABI”), an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $1,249,284 in Rule 12b-1 fees from the Portfolio.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $2,934,655 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
13 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. In addition, the contractual management fee does not reflect any advisory fee waivers for expense caps that would effectively reduce the actual management fee. |
14 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
15 | | Most recently completed fiscal year Class A total expense ratio. |
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BALANCED WEALTH STRATEGY PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year.
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of approximately $1,385 from the Portfolio.16
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions for such transactions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for its clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously, in February 2008, the independent consultant provided the Board of Directors an update of the Deli17 study on advisory fees and various fund characteristics.18 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.19 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
16 | | The Fund (which includes the Portfolio and other series of the Fund) paid ABIS a flat fee of $18,000 in 2013. |
17 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
18 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
19 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
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| | AllianceBernstein Variable Products Series Fund |
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $480 billion as of June 30, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3 and 5 year net performance returns and rankings20 of the Portfolio relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)21 for the periods ended May 31, 2014.22
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Portfolio | | Portfolio Return (%) | | | Lipper PG Median (%) | | | Lipper PU Median (%) | | | Lipper PG Rank | | | Lipper PU Rank | |
Balanced Wealth Strategy Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 13.90 | | | | 13.31 | | | | 13.30 | | | | 5/11 | | | | 14/32 | |
3 year | | | 8.61 | | | | 10.18 | | | | 9.17 | | | | 9/10 | | | | 19/29 | |
5 year | | | 12.10 | | | | 12.49 | | | | 12.26 | | | | 8/10 | | | | 17/27 | |
Set forth below are the 1, 3 and 5 year and since inception net performance returns of the Portfolio (in bold) versus its benchmark for the periods ended May 31, 2014.23
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| | Periods Ending May 31, 2014 Annualized Net Performance (%) | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | Since Inception (%) | |
Balanced Wealth Strategy Portfolio | | | 13.90 | | | | 8.61 | | | | 12.10 | | | | 6.09 | |
60% S&P 500 Stock Index / 40% Barclays U.S. Aggregate Index | | | 13.16 | | | | 10.60 | | | | 13.11 | | | | 7.09 | |
S&P 500 Stock Index | | | 20.45 | | | | 15.15 | | | | 18.40 | | | | 7.72 | |
Barclays U.S. Aggregate Index | | | 2.71 | | | | 3.55 | | | | 4.96 | | | | 4.93 | |
Inception Date: July 1, 2004 | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: August 29, 2014
20 | | The performance rankings are for the Class A shares of the Portfolio. The performance returns of the Portfolio shown were provided by Lipper. |
21 | | The Portfolio’s PG/PU is identical to the Portfolio’s EG/EU. |
22 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
23 | | The performance returns shown in the table are for the Class A shares of the Portfolio. The performance returns for the Portfolio and the benchmark were provided by the Adviser. |
65
VPS-BW-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | DYNAMIC ASSET ALLOCATION PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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DYNAMIC ASSET ALLOCATION |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2014
The following is an update of AllianceBernstein Variable Products Series Fund—Dynamic Asset Allocation Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to maximize total return consistent with AllianceBernstein L.P’s (the “Adviser’s”) determination of reasonable risk. The Portfolio invests in a globally diversified portfolio of equity and debt securities, including exchange-traded funds (“ETFs”), and other financial instruments, and expects to enter into derivatives transactions, such as options, futures, forwards, or swap agreements to achieve market exposure. The Portfolio’s neutral weighting, from which it will make its tactical asset allocations, is 60% equity exposure and 40% debt exposure. Within these broad components, the Portfolio may invest in any type of security, including common and preferred stocks, warrants and convertible securities, government and corporate fixed-income securities, commodities, currencies, real estate-related securities and inflation-protected securities. The Portfolio may invest in U.S., non-U.S. and emerging market issuers. The Portfolio may invest in securities of companies across the capitalization spectrum, including smaller capitalization companies. The Portfolio expects its investments in fixed-income securities to have a broad range of maturities and quality levels. The Portfolio is expected to be highly diversified across industries, sectors and countries, and will choose its positions from several market indices worldwide in a manner that is intended to track the performance (before fees and expenses) of those indices.
The Adviser will continuously monitor the risks presented by the Portfolio’s asset allocation and may make frequent adjustments to the Portfolio’s exposures to different asset classes. Using its proprietary Dynamic Asset Allocation techniques, the Adviser will adjust the Portfolio’s exposure to the equity and debt markets, and to segments within those markets, in response to the Adviser’s assessment of the relative risks and returns of those segments. For example, when the Adviser determines that equity market volatility is particularly low and that, therefore, the equity markets present reasonable return opportunities, the Adviser may increase the Portfolio’s equity exposure to as much as 80%. Conversely, when the Adviser determines that the risks in the equity markets are disproportionately greater than the potential returns offered, the Adviser may reduce the Portfolio’s equity exposure significantly below the target percentage or may even decide to eliminate equity exposure altogether by increasing the Portfolio’s fixed-income exposure to 100%. This investment strategy is intended to reduce the Portfolio’s overall investment risk, but may at times result in the Portfolio underperforming the markets.
The Portfolio expects to utilize derivatives and to invest in ETFs to a significant extent. Derivatives and ETFs may provide more efficient and economical exposure to market segments than direct investments, and the Portfolio’s market exposures may at times be achieved almost entirely through the use of derivatives or through the investments in ETFs. Derivatives transactions and ETFs may also be a quicker and more efficient way to alter the Portfolio’s exposure than buying and selling direct investments. As a result, the Adviser expects to use derivatives as one of the primary tools for adjusting the Portfolio’s exposure levels from its neutral weighting. The Adviser also expects to use direct investments and ETFs to adjust the Portfolio’s exposure levels. In determining when and to what extent to enter into derivatives transactions or to invest in ETFs, the Adviser will consider factors such as the relative risks and returns expected of potential investments and the cost of such transactions. The Adviser will consider the impact of derivatives and ETFs in making its assessment of the Portfolio’s risks.
Currency exchange rate fluctuations can have a dramatic impact on returns, significantly adding to returns in some years and greatly diminishing them in others. To the extent that the Portfolio invests in non-U.S. dollar-denominated investments, the Adviser will integrate the risks of foreign currency exposures into its investment and asset allocation decision making. The Adviser may seek to hedge all or a portion of the currency exposure resulting from the Portfolio’s investments or decide not to hedge this exposure. The Adviser may also seek investment opportunities through currencies and currency-related derivatives.
INVESTMENT RESULTS
The table on page 5 shows the Portfolio’s performance compared to its primary benchmark, the Morgan Stanley Capital International (“MSCI”) World Index, its secondary benchmark, the Barclays U.S. Treasury Index and its blended benchmark, a 60% / 40% blend of the MSCI World Index and the Barclays U.S. Treasury Index, respectively, for the one-year period ended December 31, 2014, and since the Portfolio’s inception on April 1, 2011.
All share classes of the Portfolio underperformed the primary, secondary and blended benchmarks for the annual period. The Portfolio’s equity overweight added to performance, yet, within stocks, developed-international and emerging-market holdings detracted. Holdings in real
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| | AllianceBernstein Variable Products Series Fund |
estate equities contributed to performance. The Portfolio’s diversification into high yield credit negatively impacted performance given the strong returns of U.S. equities, real estate investment trusts (“REITs”) and global bonds. An overweight to the U.S. dollar, as a result of currency hedging, contributed to performance.
During the annual period, the Portfolio utilized derivatives including futures and total return swaps for hedging and investment purposes; credit default swaps for investment purposes; and written options and interest rate swaps for hedging purposes, which all added to performance. Currencies for hedging and investment purposes, and purchased options for hedging purposes, detracted.
MARKET REVIEW AND INVESTMENT STRATEGY
Throughout 2014, the Portfolio had an overweight in risk assets with U.S. equities, developed international equities, and REITs in excess of benchmark weights, although the degree and composition of the overweight varied as market conditions changed. This position was supported by the view of the Dynamic Asset Allocation Team (the “Team”) that easy monetary policies of central banks would continue to provide liquidity to markets, creating conditions with low interest rates and where equity volatility was also to likely to remain low. At the same time, strong corporate balance sheets and earnings trends offset slightly elevated equity valuations.
The Portfolio maintained a regional bias towards developed-international equity markets—particularly in Europe and Japan—as a result of more favorable valuations. However, the extent and composition of the overweight varied over 2014. The Portfolio’s position in emerging-market equities was small throughout the year due to growth concerns around emerging economies, and given subdued prospects for inflation. For diversification, the Portfolio maintained a modest allocation to REITs, and remained underweight bonds through most of the year. A modest amount of cash was held at times to further reduce the Portfolio’s duration.
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DYNAMIC ASSET ALLOCATION PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged MSCI World Index and the unmanaged Barclays U.S. Treasury Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI World Index (free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets. The Barclays U.S. Treasury Index represents the performance of U.S. Treasuries within the U.S. government fixed-income market. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Interest Rate Risk: Changes in interest rates will affect the value of the Portfolio’s investments in fixed-income securities. When interest rates rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Allocation Risk: The allocation of investments among different global asset classes may have a significant effect on the Portfolio’s net asset value (“NAV”) when one of these asset classes is performing more poorly than others. As both the direct investments and derivative positions will be periodically adjusted to reflect the Adviser’s view of market and economic conditions, there will be transaction costs which may be, over time, significant. In addition, there is a risk that certain asset allocation decisions may not achieve the desired results and, as a result, the Portfolio may incur significant losses.
Foreign (Non-U.S.) Risk: The Portfolio’s investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk: Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
ETF Risk: ETFs are investment companies. When the Portfolio invests in an ETF, the Portfolio bears its share of the ETF’s expenses and runs the risk that the ETF may not achieve its investment objective.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Leverage Risk: When the Portfolio borrows money or otherwise leverages its portfolio, it may be more volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Portfolio’s investments. The Portfolio may create leverage through the use of reverse repurchase agreements, forward commitments, or by borrowing money.
Liquidity Risk: Liquidity risk exists when a particular instrument is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous price.
(Disclosures, Risks and Note about Historical Performance continued on next page)
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DYNAMIC ASSET ALLOCATION PORTFOLIO |
DISCLOSURESAND RISKS | | |
(continued from previous page) | | AllianceBernstein Variable Products Series Fund |
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Real Estate Risk: The Portfolio’s investments in real estate securities have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in real estate investment trusts, or REITs, may have additional risks. REITs are dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in taxes.
Commodity Risk: Investing in commodities and commodity-linked derivative instruments may subject the Portfolio to greater volatility than investments in traditional securities. The value of commodity-linked derivative instruments may be affected by overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
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DYNAMIC ASSET ALLOCATION PORTFOLIO |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
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THE PORTFOLIO VS. ITS BENCHMARKS | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | Since Inception* | |
Dynamic Asset Allocation Portfolio Class A | | | 4.45% | | | | 5.85% | |
Dynamic Asset Allocation Portfolio Class B | | | 4.21% | | | | 5.61% | |
Primary Benchmark: MSCI World Index | | | 4.94% | | | | 8.98% | |
Secondary Benchmark: Barclays U.S. Treasury Index | | | 5.05% | | | | 3.70% | |
Blended Benchmark: 60% MSCI World Index / 40% Barclays U.S. Treasury Index | | | 5.07% | | | | 7.11% | |
* Since inception of the Portfolio’s Class A and Class B shares on 4/1/2011. | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.91% and 1.16% for Class A and Class B shares, respectively, gross of any fee waivers or expense reimbursements. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.87% and 1.12% for Class A and Class B, respectively. These waivers/reimbursements may not be terminated before May 1, 2015 and may be extended by the Adviser for additional one-year terms. Absent reimbursements or waivers, performance would have been lower. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
DYNAMIC ASSET ALLOCATION PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
4/1/2011† – 12/31/14 (unaudited)
† | | Since inception of the Portfolio’s Class A shares on 4/1/2011. |
This chart illustrates the total value of an assumed $10,000 investment in Dynamic Asset Allocation Portfolio Class A shares (from 4/1/2011† to 12/31/14) as compared to the performance of the primary, secondary and blended benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 3-4.
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DYNAMIC ASSET ALLOCATION PORTFOLIO |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,001.80 | | | $ | 4.29 | | | | 0.85 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.92 | | | $ | 4.33 | | | | 0.85 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,000.10 | | | $ | 5.55 | | | | 1.10 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.66 | | | $ | 5.60 | | | | 1.10 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
6
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
U.S. Treasury Bonds & Notes | | $ | 94,820,394 | | | | 19.7 | % |
SPDR S&P 500 ETF Trust | | | 39,423,737 | | | | 8.2 | |
Inflation-Linked Securities | | | 27,603,728 | | | | 5.8 | |
iShares Core MSCI Emerging Markets ETF | | | 23,506,252 | | | | 4.8 | |
Vanguard REIT ETF | | | 9,889,371 | | | | 2.1 | |
iShares MSCI All Country Asia ex Japan ETF | | | 5,993,684 | | | | 1.2 | |
Vanguard Small-Cap ETF | | | 4,829,724 | | | | 1.0 | |
iShares International Developed Real Estate ETF | | | 4,812,108 | | | | 1.0 | |
iShares MSCI EAFE ETF | | | 2,616,303 | | | | 0.5 | |
Apple, Inc. | | | 2,450,657 | | | | 0.5 | |
| | | | | | | | |
| | $ | 215,945,958 | | | | 44.8 | % |
PORTFOLIO BREAKDOWN†
December 31, 2014 (unaudited)
| | | | |
ASSET CLASSES | | CURRENT ALLOCATION | |
Equities | | | | |
U.S. Large Cap | | | 22.8 | % |
International Large Cap | | | 24.9 | |
U.S. Mid-Cap | | | 2.5 | |
U.S. Small-Cap | | | 3.0 | |
Emerging Market Equities | | | 4.9 | |
Real Estate Equities | | | 4.0 | |
| | | | |
Sub-total | | | 62.1 | |
| | | | |
Fixed Income | | | | |
U.S. Bonds | | | 26.5 | |
International Bonds | | | 5.0 | |
TIPS | | | 5.7 | |
| | | | |
Sub-total | | | 37.2 | |
| | | | |
Cash | | | 0.7 | |
| | | | |
Total | | | 100.0 | % |
SECURITY TYPE BREAKDOWN‡
December 31, 2014 (unaudited)
| | | | | | | | |
SECURITY TYPE | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Common Stocks | | $ | 143,412,581 | | | | 28.7 | % |
Governments—Treasuries | | | 94,820,395 | | | | 19.0 | |
Investment Companies | | | 91,071,178 | | | | 18.3 | |
Inflation-Linked Securities | | | 27,603,728 | | | | 5.5 | |
Short-Term Investments | | | 142,291,638 | | | | 28.5 | |
| | | | | | | | |
Total Investments | | $ | 499,199,520 | | | | 100.0 | % |
† | | All data are as of December 31, 2014. The Portfolio breakdown is expressed as an approximate percentage of the Portfolio’s total investments inclusive of derivative exposure, based on the Adviser’s internal classification guidelines. |
‡ | | The Portfolio’s security type breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Portfolio also enters into derivative transactions, which may be used for hedging or investment purposes (see “Portfolio of Investments” section of the report for additional details). |
7
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–29.8% | | | | | | | | |
FINANCIALS–6.3% | | | | | | | | |
BANKS–2.9% | | | | | | | | |
Aozora Bank Ltd. | | | 6,000 | | | $ | 18,573 | |
Australia & New Zealand Banking Group Ltd. | | | 16,735 | | | | 435,444 | |
Banco Bilbao Vizcaya Argentaria SA | | | 36,403 | | | | 343,805 | |
Banco Comercial Portugues SA(a) | | | 159,486 | | | | 12,515 | |
Banco de Sabadell SA | | | 20,710 | | | | 54,798 | |
Banco Espirito Santo SA(a)(b)(c)(d) | | | 10,016 | | | | –0 | –^ |
Banco Popular Espanol SA | | | 10,844 | | | | 54,055 | |
Banco Santander SA | | | 75,032 | | | | 629,752 | |
Bank Hapoalim BM | | | 4,812 | | | | 22,627 | |
Bank Leumi Le-Israel BM(a) | | | 12,645 | | | | 43,198 | |
Bank of America Corp. | | | 39,445 | | | | 705,671 | |
Bank of East Asia Ltd. | | | 9,600 | | | | 38,615 | |
Bank of Ireland(a) | | | 199,710 | | | | 74,949 | |
Bank of Kyoto Ltd. (The) | | | 2,000 | | | | 16,719 | |
Bank of Queensland Ltd. | | | 3,683 | | | | 36,285 | |
Bank of Yokohama Ltd. (The) | | | 5,000 | | | | 27,156 | |
Bankia SA(a) | | | 22,531 | | | | 33,434 | |
Bankinter SA | | | 3,048 | | | | 24,487 | |
Barclays PLC | | | 99,698 | | | | 374,798 | |
BB&T Corp. | | | 2,700 | | | | 105,003 | |
Bendigo & Adelaide Bank Ltd. | | | 3,446 | | | | 35,831 | |
BNP Paribas SA | | | 6,431 | | | | 379,648 | |
BOC Hong Kong Holdings Ltd. | | | 22,500 | | | | 74,829 | |
CaixaBank SA | | | 13,908 | | | | 72,876 | |
Chiba Bank Ltd. (The) | | | 3,000 | | | | 19,659 | |
Citigroup, Inc. | | | 11,379 | | | | 615,718 | |
Comerica, Inc. | | | 650 | | | | 30,446 | |
Commerzbank AG(a) | | | 4,351 | | | | 57,070 | |
Commonwealth Bank of Australia | | | 9,843 | | | | 683,879 | |
Credit Agricole SA | | | 6,256 | | | | 80,756 | |
Danske Bank A/S | | | 3,980 | | | | 107,603 | |
DBS Group Holdings Ltd. | | | 10,000 | | | | 154,813 | |
DnB ASA | | | 4,364 | | | | 64,372 | |
Erste Group Bank AG | | | 1,696 | | | | 39,447 | |
Fifth Third Bancorp | | | 3,090 | | | | 62,959 | |
Fukuoka Financial Group, Inc. | | | 4,000 | | | | 20,622 | |
Gunma Bank Ltd. (The) | | | 4,000 | | | | 25,958 | |
Hachijuni Bank Ltd. (The) | | | 4,000 | | | | 25,694 | |
Hang Seng Bank Ltd. | | | 4,600 | | | | 76,454 | |
Hiroshima Bank Ltd. (The) | | | 5,000 | | | | 23,798 | |
HSBC Holdings PLC | | | 116,255 | | | | 1,098,582 | |
Huntington Bancshares, Inc./OH | | | 3,015 | | | | 31,718 | |
ING Groep NV(a) | | | 17,105 | | | | 220,991 | |
Intesa Sanpaolo SpA | | | 70,654 | | | | 204,960 | |
Iyo Bank Ltd. (The) | | | 2,000 | | | | 21,661 | |
Joyo Bank Ltd. (The) | | | 3,000 | | | | 14,856 | |
JPMorgan Chase & Co. | | | 14,115 | | | | 883,317 | |
KBC Groep NV(a) | | | 1,520 | | | | 84,831 | |
KeyCorp | | | 3,275 | | | | 45,523 | |
Lloyds Banking Group PLC(a) | | | 346,648 | | | | 407,748 | |
| | | | | | | | |
| | | | | | | | |
M&T Bank Corp. | | | 515 | | | $ | 64,694 | |
Mitsubishi UFJ Financial Group, Inc. | | | 77,400 | | | | 425,253 | |
Mizrahi Tefahot Bank Ltd.(a) | | | 973 | | | | 10,183 | |
Mizuho Financial Group, Inc. | | | 140,100 | | | | 234,850 | |
National Australia Bank Ltd. | | | 14,363 | | | | 391,683 | |
Natixis SA | | | 9,006 | | | | 59,427 | |
Nordea Bank AB | | | 18,440 | | | | 213,457 | |
Oversea-Chinese Banking Corp., Ltd. | | | 18,000 | | | | 141,624 | |
PNC Financial Services Group, Inc. (The) | | | 2,030 | | | | 185,197 | |
Raiffeisen Bank International AG | | | 1,100 | | | | 16,808 | |
Regions Financial Corp. | | | 5,025 | | | | 53,064 | |
Resona Holdings, Inc. | | | 13,400 | | | | 67,690 | |
Royal Bank of Scotland Group PLC(a) | | | 15,350 | | | | 93,392 | |
Seven Bank Ltd. | | | 5,324 | | | | 22,347 | |
Shinsei Bank Ltd. | | | 12,000 | | | | 20,885 | |
Shizuoka Bank Ltd. (The) | | | 4,000 | | | | 36,577 | |
Skandinaviska Enskilda Banken AB–Class A | | | 9,222 | | | | 117,106 | |
Societe Generale SA | | | 4,399 | | | | 184,099 | |
Standard Chartered PLC | | | 14,996 | | | | 224,279 | |
Sumitomo Mitsui Financial Group, Inc. | | | 7,700 | | | | 278,376 | |
Sumitomo Mitsui Trust Holdings, Inc. | | | 20,000 | | | | 76,606 | |
SunTrust Banks, Inc. | | | 1,990 | | | | 83,381 | |
Suruga Bank Ltd. | | | 1,000 | | | | 18,377 | |
Svenska Handelsbanken AB–Class A | | | 2,228 | | | | 104,243 | |
Swedbank AB–Class A | | | 4,044 | | | | 100,335 | |
UniCredit SpA | | | 26,697 | | | | 171,011 | |
Unione di Banche Italiane SCpA | | | 5,202 | | | | 37,206 | |
United Overseas Bank Ltd. | | | 8,000 | | | | 147,632 | |
US Bancorp/MN | | | 6,765 | | | | 304,087 | |
Wells Fargo & Co. | | | 17,825 | | | | 977,166 | |
Westpac Banking Corp. | | | 18,875 | | | | 507,658 | |
Zions Bancorporation | | | 730 | | | | 20,812 | |
| | | | | | | | |
| | | | | | | 14,108,008 | |
| | | | | | | | |
CAPITAL MARKETS–0.6% | | | | | | | | |
3i Group PLC | | | 7,720 | | | | 53,830 | |
Aberdeen Asset Management PLC | | | 5,585 | | | | 37,319 | |
Affiliated Managers Group, Inc.(a) | | | 207 | | | | 43,934 | |
Ameriprise Financial, Inc. | | | 695 | | | | 91,914 | |
Bank of New York Mellon Corp. (The) | | | 4,215 | | | | 171,003 | |
BlackRock, Inc.–Class A | | | 477 | | | | 170,556 | |
Charles Schwab Corp. (The) | | | 4,290 | | | | 129,515 | |
Credit Suisse Group AG(a) | | | 9,269 | | | | 232,849 | |
Daiwa Securities Group, Inc. | | | 10,000 | | | | 78,301 | |
Deutsche Bank AG (REG) | | | 8,374 | | | | 250,754 | |
E*TRADE Financial Corp.(a) | | | 1,020 | | | | 24,740 | |
8
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Franklin Resources, Inc. | | | 1,470 | | | $ | 81,394 | |
Goldman Sachs Group, Inc. (The) | | | 1,538 | | | | 298,110 | |
Hargreaves Lansdown PLC | | | 1,481 | | | | 23,173 | |
ICAP PLC | | | 4,211 | | | | 29,486 | |
Invesco Ltd. | | | 1,580 | | | | 62,442 | |
Investec PLC | | | 2,464 | | | | 20,644 | |
Julius Baer Group Ltd.(a) | | | 1,220 | | | | 55,703 | |
Legg Mason, Inc. | | | 360 | | | | 19,213 | |
Macquarie Group Ltd. | | | 1,755 | | | | 82,760 | |
Mediobanca SpA | | | 3,505 | | | | 28,480 | |
Morgan Stanley | | | 5,720 | | | | 221,936 | |
Nomura Holdings, Inc. | | | 22,000 | | | | 124,499 | |
Northern Trust Corp. | | | 810 | | | | 54,594 | |
Partners Group Holding AG | | | 158 | | | | 45,968 | |
Schroders PLC | | | 729 | | | | 30,299 | |
State Street Corp. | | | 1,585 | | | | 124,422 | |
T Rowe Price Group, Inc. | | | 975 | | | | 83,713 | |
UBS Group AG(a) | | | 22,171 | | | | 381,113 | |
| | | | | | | | |
| | | | | | | 3,052,664 | |
| | | | | | | | |
CONSUMER FINANCE–0.2% | | | | | | | | |
Acom Co., Ltd.(a)(d) | | | 6,200 | | | | 18,928 | |
AEON Financial Service Co., Ltd. | | | 800 | | | | 15,801 | |
American Express Co. | | | 3,360 | | | | 312,614 | |
Capital One Financial Corp. | | | 2,113 | | | | 174,428 | |
Credit Saison Co., Ltd. | | | 700 | | | | 13,017 | |
Discover Financial Services | | | 1,710 | | | | 111,988 | |
Navient Corp. | | | 1,500 | | | | 32,415 | |
| | | | | | | | |
| | | | | | | 679,191 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–0.5% | | | | | | | | |
ASX Ltd. | | | 1,453 | | | | 43,350 | |
Berkshire Hathaway, Inc.–Class B(a) | | | 6,830 | | | | 1,025,524 | |
CME Group, Inc./IL–Class A | | | 1,200 | | | | 106,380 | |
Deutsche Boerse AG | | | 1,511 | | | | 107,374 | |
Eurazeo SA | | | 1,184 | | | | 82,923 | |
Exor SpA | | | 1,279 | | | | 52,480 | |
Friends Life Group Ltd. | | | 8,609 | | | | 48,892 | |
Groupe Bruxelles Lambert SA | | | 360 | | | | 30,715 | |
Hong Kong Exchanges and Clearing Ltd. | | | 6,700 | | | | 147,914 | |
Industrivarden AB–Class C | | | 996 | | | | 17,289 | |
Intercontinental Exchange, Inc. | | | 466 | | | | 102,189 | |
Investment AB Kinnevik–Class B | | | 2,015 | | | | 65,526 | |
Investor AB–Class B | | | 1,705 | | | | 61,990 | |
Japan Exchange Group, Inc. | | | 1,583 | | | | 36,902 | |
Leucadia National Corp. | | | 1,105 | | | | 24,774 | |
London Stock Exchange Group PLC | | | 1,369 | | | | 47,106 | |
McGraw Hill Financial, Inc. | | | 1,010 | | | | 89,870 | |
Mitsubishi UFJ Lease & Finance Co., Ltd. | | | 3,500 | | | | 16,460 | |
Moody’s Corp. | | | 695 | | | | 66,588 | |
NASDAQ OMX Group, Inc. (The) | | | 410 | | | | 19,664 | |
ORIX Corp. | | | 8,040 | | | | 101,166 | |
| | | | | | | | |
Pargesa Holding SA | | | 255 | | | $ | 19,677 | |
Singapore Exchange Ltd. | | | 10,000 | | | | 58,791 | |
Wendel SA | | | 398 | | | | 44,593 | |
| | | | | | | | |
| | | | | | | 2,418,137 | |
| | | | | | | | |
INSURANCE–1.2% | | | | | | | | |
ACE Ltd. | | | 1,285 | | | | 147,621 | |
Admiral Group PLC | | | 819 | | | | 16,802 | |
Aegon NV | | | 11,089 | | | | 83,345 | |
Aflac, Inc. | | | 1,705 | | | | 104,158 | |
Ageas | | | 1,646 | | | | 58,524 | |
AIA Group Ltd. | | | 73,125 | | | | 401,916 | |
Allianz SE | | | 2,771 | | | | 458,950 | |
Allstate Corp. (The) | | | 1,600 | | | | 112,400 | |
American International Group, Inc. | | | 5,352 | | | | 299,766 | |
AMP Ltd. | | | 17,956 | | | | 79,972 | |
Aon PLC | | | 1,115 | | | | 105,735 | |
Assicurazioni Generali SpA | | | 5,214 | | | | 107,058 | |
Assurant, Inc. | | | 260 | | | | 17,792 | |
Aviva PLC | | | 17,895 | | | | 134,452 | |
Baloise Holding AG | | | 277 | | | | 35,404 | |
Chubb Corp. (The) | | | 910 | | | | 94,158 | |
Cincinnati Financial Corp. | | | 560 | | | | 29,025 | |
CNP Assurances | | | 4,544 | | | | 80,557 | |
Dai-ichi Life Insurance Co., Ltd. (The) | | | 6,545 | | | | 99,352 | |
Direct Line Insurance Group PLC | | | 6,949 | | | | 31,434 | |
Genworth Financial, Inc.– Class A(a) | | | 1,785 | | | | 15,173 | |
Gjensidige Forsikring ASA | | | 3,007 | | | | 49,066 | |
Hannover Rueck SE | | | 377 | | | | 34,010 | |
Hartford Financial Services Group, Inc. (The) | | | 1,675 | | | | 69,831 | |
Insurance Australia Group Ltd. | | | 10,333 | | | | 52,466 | |
Legal & General Group PLC | | | 36,049 | | | | 139,190 | |
Lincoln National Corp. | | | 990 | | | | 57,093 | |
Loews Corp. | | | 1,140 | | | | 47,903 | |
Mapfre SA | | | 10,570 | | | | 35,726 | |
Marsh & McLennan Cos., Inc. | | | 2,040 | | | | 116,770 | |
Medibank Pvt Ltd.(a) | | | 12,501 | | | | 24,596 | |
MetLife, Inc. | | | 4,220 | | | | 228,260 | |
MS&AD Insurance Group Holdings, Inc. | | | 3,100 | | | | 73,464 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen | | | 1,050 | | | | 209,094 | |
Old Mutual PLC | | | 29,782 | | | | 87,772 | |
Principal Financial Group, Inc. | | | 1,040 | | | | 54,018 | |
Progressive Corp. (The) | | | 1,995 | | | | 53,845 | |
Prudential Financial, Inc. | | | 1,715 | | | | 155,139 | |
Prudential PLC | | | 15,581 | | | | 360,225 | |
QBE Insurance Group Ltd. | | | 8,147 | | | | 73,978 | |
RSA Insurance Group PLC(a) | | | 7,994 | | | | 53,971 | |
Sampo Oyj–Class A | | | 2,714 | | | | 127,054 | |
SCOR SE | | | 1,611 | | | | 48,814 | |
Sompo Japan Nipponkoa Holdings, Inc. | | | 2,000 | | | | 50,295 | |
Sony Financial Holdings, Inc. | | | 875 | | | | 12,884 | |
9
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Standard Life PLC | | | 14,518 | | | $ | 89,929 | |
Suncorp Group Ltd. | | | 7,811 | | | | 89,231 | |
Swiss Life Holding AG(a) | | | 249 | | | | 58,852 | |
Swiss Re AG(a) | | | 2,138 | | | | 179,104 | |
T&D Holdings, Inc. | | | 2,600 | | | | 31,168 | |
Tokio Marine Holdings, Inc. | | | 4,200 | | | | 136,406 | |
Torchmark Corp. | | | 502 | | | | 27,193 | |
Travelers Cos., Inc. (The) | | | 1,280 | | | | 135,488 | |
Tryg A/S | | | 159 | | | | 17,766 | |
UnipolSai SpA | | | 4,035 | | | | 10,864 | |
Unum Group | | | 920 | | | | 32,090 | |
Vienna Insurance Group AG Wiener Versicherung Gruppe | | | 190 | | | | 8,492 | |
XL Group PLC | | | 960 | | | | 32,995 | |
Zurich Insurance Group AG(a) | | | 907 | | | | 283,440 | |
| | | | | | | | |
| | | | | | | 5,862,076 | |
| | | | | | | | |
REAL ESTATE INVESTMENT TRUSTS (REITS)–0.6% | | | | | | | | |
American Tower Corp. | | | 1,515 | | | | 149,758 | |
Apartment Investment & Management Co.–Class A | | | 525 | | | | 19,504 | |
AvalonBay Communities, Inc. | | | 495 | | | | 80,878 | |
Boston Properties, Inc. | | | 600 | | | | 77,214 | |
British Land Co. PLC (The) | | | 5,864 | | | | 70,712 | |
CapitaMall Trust | | | 14,000 | | | | 21,495 | |
Crown Castle International Corp. | | | 1,270 | | | | 99,949 | |
Dexus Property Group | | | 3,880 | | | | 21,964 | |
Equity Residential | | | 1,340 | | | | 96,266 | |
Essex Property Trust, Inc. | | | 228 | | | | 47,105 | |
Fonciere Des Regions | | | 329 | | | | 30,408 | |
Gecina SA | | | 253 | | | | 31,584 | |
General Growth Properties, Inc. | | | 2,344 | | | | 65,937 | |
Goodman Group(d) | | | 10,596 | | | | 48,942 | |
GPT Group (The) | | | 6,698 | | | | 23,705 | |
Hammerson PLC | | | 4,761 | | | | 44,586 | |
HCP, Inc. | | | 1,680 | | | | 73,970 | |
Health Care REIT, Inc. | | | 1,225 | | | | 92,696 | |
Host Hotels & Resorts, Inc. | | | 2,750 | | | | 65,367 | |
ICADE | | | 449 | | | | 35,926 | |
Intu Properties PLC | | | 5,825 | | | | 30,115 | |
Iron Mountain, Inc. | | | 658 | | | | 25,438 | |
Japan Prime Realty Investment Corp. | | | 7 | | | | 24,356 | |
Japan Real Estate Investment Corp. | | | 8 | | | | 38,546 | |
Japan Retail Fund Investment Corp. | | | 15 | | | | 31,699 | |
Kimco Realty Corp. | | | 1,480 | | | | 37,207 | |
Klepierre | | | 1,311 | | | | 56,292 | |
Land Securities Group PLC | | | 4,798 | | | | 86,247 | |
Link REIT (The) | | | 10,500 | | | | 65,670 | |
Macerich Co. (The) | | | 510 | | | | 42,539 | |
Mirvac Group | | | 40,488 | | | | 58,568 | |
Nippon Building Fund, Inc.(d) | | | 9 | | | | 45,181 | |
Nippon Prologis REIT, Inc.(d) | | | 5 | | | | 10,856 | |
Novion Property Group(d) | | | 34,531 | | | | 59,353 | |
Plum Creek Timber Co., Inc. | | | 630 | | | | 26,958 | |
| | | | | | | | |
Prologis, Inc. | | | 1,870 | | | $ | 80,466 | |
Public Storage | | | 580 | | | | 107,213 | |
Scentre Group(a) | | | 33,577 | | | | 95,129 | |
Segro PLC | | | 3,337 | | | | 19,117 | |
Simon Property Group, Inc. | | | 1,166 | | | | 212,340 | |
Stockland(d) | | | 14,259 | | | | 47,652 | |
Unibail-Rodamco SE | | | 613 | | | | 157,256 | |
United Urban Investment Corp. | | | 12 | | | | 18,889 | |
Ventas, Inc. | | | 1,091 | | | | 78,225 | |
Vornado Realty Trust | | | 685 | | | | 80,631 | |
Westfield Corp. | | | 9,308 | | | | 68,231 | |
Weyerhaeuser Co. | | | 1,940 | | | | 69,627 | |
| | | | | | | | |
| | | | | | | 2,871,767 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–0.3% | | | | | | | | |
Aeon Mall Co., Ltd. | | | 700 | | | | 12,405 | |
CapitaLand Ltd. | | | 35,000 | | | | 87,022 | |
CBRE Group, Inc.–Class A(a) | | | 1,015 | | | | 34,764 | |
Cheung Kong Holdings Ltd. | | | 8,000 | | | | 134,180 | |
City Developments Ltd. | | | 3,000 | | | | 23,145 | |
Daito Trust Construction Co., Ltd. | | | 400 | | | | 45,375 | |
Daiwa House Industry Co., Ltd. | | | 3,000 | | | | 56,674 | |
Deutsche Annington Immobilien SE | | | 1,246 | | | | 42,304 | |
Deutsche Wohnen AG | | | 1,334 | | | | 31,469 | |
Global Logistic Properties Ltd. | | | 30,422 | | | | 56,719 | |
Hang Lung Properties Ltd. | | | 14,000 | | | | 39,056 | |
Henderson Land Development Co., Ltd. | | | 4,840 | | | | 33,577 | |
Hulic Co., Ltd. | | | 2,197 | | | | 21,964 | |
IMMOFINANZ AG(a) | | | 4,285 | | | | 10,792 | |
Kerry Properties Ltd. | | | 8,500 | | | | 30,609 | |
Lend Lease Group | | | 3,450 | | | | 45,950 | |
Mitsubishi Estate Co., Ltd. | | | 8,000 | | | | 168,567 | |
Mitsui Fudosan Co., Ltd. | | | 6,000 | | | | 160,893 | |
New World Development Co., Ltd. | | | 22,000 | | | | 25,256 | |
Nomura Real Estate Holdings, Inc. | | | 800 | | | | 13,690 | |
NTT Urban Development Corp. | | | 1,600 | | | | 16,113 | |
Sino Land Co., Ltd. | | | 16,000 | | | | 25,521 | |
Sumitomo Realty & Development Co., Ltd. | | | 2,000 | | | | 68,138 | |
Sun Hung Kai Properties Ltd. | | | 10,000 | | | | 151,504 | |
Swire Pacific Ltd.–Class A | | | 2,000 | | | | 25,961 | |
Swire Properties Ltd. | | | 25,389 | | | | 74,868 | |
Tokyo Tatemono Co., Ltd. | | | 3,000 | | | | 21,833 | |
Tokyu Fudosan Holdings Corp. | | | 2,000 | | | | 13,876 | |
Wharf Holdings Ltd. (The) | | | 13,000 | | | | 93,328 | |
Wheelock & Co., Ltd. | | | 6,000 | | | | 27,858 | |
| | | | | | | | |
| | | | | | | 1,593,411 | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–0.0% | | | | | | | | |
Hudson City Bancorp, Inc. | | | 1,730 | | | | 17,507 | |
People’s United Financial, Inc. | | | 1,015 | | | | 15,408 | |
| | | | | | | | |
| | | | | | | 32,915 | |
| | | | | | | | |
| | | | | | | 30,618,169 | |
| | | | | | | | |
10
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
HEALTH CARE–3.8% | | | | | | | | |
BIOTECHNOLOGY–0.5% | | | | | | | | |
Actelion Ltd. (REG)(a) | | | 608 | | | $ | 69,994 | |
Alexion Pharmaceuticals, Inc.(a) | | | 780 | | | | 144,323 | |
Amgen, Inc. | | | 2,853 | | | | 454,454 | |
Biogen Idec, Inc.(a) | | | 915 | | | | 310,597 | |
Celgene Corp.(a) | | | 3,030 | | | | 338,936 | |
CSL Ltd. | | | 2,881 | | | | 202,378 | |
Gilead Sciences, Inc.(a) | | | 5,680 | | | | 535,397 | |
Grifols SA | | | 757 | | | | 30,207 | |
Regeneron Pharmaceuticals, Inc.(a) | | | 290 | | | | 118,972 | |
Vertex Pharmaceuticals, Inc.(a) | | | 907 | | | | 107,752 | |
| | | | | | | | |
| | | | | | | 2,313,010 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–0.4% | | | | | | | | |
Abbott Laboratories | | | 5,615 | | | | 252,787 | |
Baxter International, Inc. | | | 2,030 | | | | 148,779 | |
Becton Dickinson and Co. | | | 730 | | | | 101,587 | |
Boston Scientific Corp.(a) | | | 4,860 | | | | 64,395 | |
CareFusion Corp.(a) | | | 740 | | | | 43,912 | |
Coloplast A/S–Class B | | | 496 | | | | 41,507 | |
Covidien PLC | | | 1,725 | | | | 176,433 | |
CR Bard, Inc. | | | 315 | | | | 52,485 | |
DENTSPLY International, Inc. | | | 530 | | | | 28,233 | |
Edwards Lifesciences Corp.(a) | | | 395 | | | | 50,315 | |
Essilor International SA | | | 1,241 | | | | 138,395 | |
Getinge AB–Class B | | | 2,013 | | | | 45,841 | |
Intuitive Surgical, Inc.(a) | | | 155 | | | | 81,986 | |
Medtronic, Inc. | | | 3,660 | | | | 264,252 | |
Olympus Corp.(a) | | | 1,500 | | | | 52,545 | |
Smith & Nephew PLC | | | 5,421 | | | | 97,754 | |
Sonova Holding AG | | | 351 | | | | 51,566 | |
St Jude Medical, Inc. | | | 1,065 | | | | 69,257 | |
Stryker Corp. | | | 1,125 | | | | 106,121 | |
Sysmex Corp. | | | 700 | | | | 31,068 | |
Terumo Corp. | | | 1,400 | | | | 31,775 | |
Varian Medical Systems, Inc.(a) | | | 395 | | | | 34,171 | |
William Demant Holding A/S(a) | | | 329 | | | | 25,029 | |
Zimmer Holdings, Inc. | | | 635 | | | | 72,022 | |
| | | | | | | | |
| | | | | | | 2,062,215 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–0.4% | | | | | | | | |
Aetna, Inc. | | | 1,317 | | | | 116,989 | |
AmerisourceBergen Corp.–Class A | | | 785 | | | | 70,776 | |
Anthem, Inc. | | | 1,050 | | | | 131,953 | |
Cardinal Health, Inc. | | | 1,245 | | | | 100,509 | |
CIGNA Corp. | | | 1,015 | | | | 104,454 | |
DaVita HealthCare Partners, Inc.(a) | | | 650 | | | | 49,231 | |
Express Scripts Holding Co.(a) | | | 2,789 | | | | 236,145 | |
Fresenius Medical Care AG & Co. KGaA | | | 1,318 | | | | 98,371 | |
Fresenius SE & Co. KGaA | | | 2,298 | | | | 119,482 | |
Healthscope Ltd.(a) | | | 13,458 | | | | 29,732 | |
Humana, Inc. | | | 565 | | | | 81,151 | |
| | | | | | | | |
| | | | | | | | |
Laboratory Corp. of America Holdings(a) | | | 325 | | | $ | 35,067 | |
McKesson Corp. | | | 865 | | | | 179,557 | |
Medipal Holdings Corp. | | | 1,500 | | | | 17,520 | |
Patterson Cos., Inc. | | | 310 | | | | 14,911 | |
Quest Diagnostics, Inc. | | | 550 | | | | 36,883 | |
Ramsay Health Care Ltd. | | | 1,156 | | | | 53,590 | |
Ryman Healthcare Ltd. | | | 3,027 | | | | 20,079 | |
Sonic Healthcare Ltd. | | | 1,715 | | | | 25,801 | |
Suzuken Co., Ltd./Aichi Japan | | | 600 | | | | 16,574 | |
Tenet Healthcare Corp.(a) | | | 343 | | | | 17,380 | |
UnitedHealth Group, Inc. | | | 3,635 | | | | 367,462 | |
Universal Health Services, Inc.–Class B | | | 350 | | | | 38,941 | |
| | | | | | | | |
| | | | | | | 1,962,558 | |
| | | | | | | | |
HEALTH CARE TECHNOLOGY–0.0% | | | | | | | | |
Cerner Corp.(a) | | | 1,130 | | | | 73,066 | |
M3, Inc. | | | 1,200 | | | | 20,078 | |
| | | | | | | | |
| | | | | | | 93,144 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–0.1% | | | | | | | | |
Agilent Technologies, Inc. | | | 1,245 | | | | 50,970 | |
Lonza Group AG(a) | | | 182 | | | | 20,492 | |
PerkinElmer, Inc. | | | 405 | | | | 17,711 | |
QIAGEN NV(a) | | | 2,306 | | | | 53,714 | |
Thermo Fisher Scientific, Inc. | | | 1,485 | | | | 186,056 | |
Waters Corp.(a) | | | 345 | | | | 38,888 | |
| | | | | | | | |
| | | | | | | 367,831 | |
| | | | | | | | |
PHARMACEUTICALS–2.4% | | | | | | | | |
AbbVie, Inc. | | | 5,945 | | | | 389,041 | |
Actavis PLC(a) | | | 1,023 | | | | 263,330 | |
Allergan, Inc./United States | | | 1,150 | | | | 244,479 | |
Astellas Pharma, Inc. | | | 13,000 | | | | 180,987 | |
AstraZeneca PLC | | | 7,665 | | | | 541,385 | |
Bayer AG | | | 5,020 | | | | 684,268 | |
Bristol-Myers Squibb Co. | | | 6,215 | | | | 366,871 | |
Chugai Pharmaceutical Co., Ltd. | | | 1,000 | | | | 24,553 | |
Daiichi Sankyo Co., Ltd. | | | 3,900 | | | | 54,533 | |
Eisai Co., Ltd. | | | 1,500 | | | | 58,010 | |
Eli Lilly & Co. | | | 3,665 | | | | 252,848 | |
GlaxoSmithKline PLC | | | 29,442 | | | | 631,637 | |
Hisamitsu Pharmaceutical Co., Inc. | | | 300 | | | | 9,460 | |
Hospira, Inc.(a) | | | 630 | | | | 38,588 | |
Johnson & Johnson | | | 10,605 | | | | 1,108,965 | |
Kyowa Hakko Kirin Co., Ltd. | | | 4,000 | | | | 37,666 | |
Mallinckrodt PLC(a) | | | 424 | | | | 41,989 | |
Merck & Co., Inc. | | | 10,805 | | | | 613,616 | |
Merck KGaA | | | 785 | | | | 73,875 | |
Mitsubishi Tanabe Pharma Corp. | | | 1,000 | | | | 14,659 | |
Mylan, Inc./PA(a) | | | 1,405 | | | | 79,200 | |
Novartis AG | | | 13,965 | | | | 1,295,163 | |
Novo Nordisk A/S–Class B | | | 12,184 | | | | 515,380 | |
Ono Pharmaceutical Co., Ltd. | | | 400 | | | | 35,414 | |
Orion Oyj–Class B | | | 465 | | | | 14,462 | |
11
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Otsuka Holdings Co., Ltd. | | | 2,371 | | | $ | 71,085 | |
Perrigo Co. PLC | | | 522 | | | | 87,258 | |
Pfizer, Inc. | | | 23,786 | | | | 740,934 | |
Roche Holding AG | | | 4,265 | | | | 1,155,568 | |
Sanofi | | | 7,220 | | | | 658,251 | |
Santen Pharmaceutical Co., Ltd. | | | 500 | | | | 26,917 | |
Shionogi & Co., Ltd. | | | 1,800 | | | | 46,504 | |
Shire PLC | | | 3,579 | | | | 253,751 | |
Sumitomo Dainippon Pharma Co., Ltd. | | | 1,400 | | | | 13,557 | |
Taisho Pharmaceutical Holdings Co., Ltd. | | | 567 | | | | 34,644 | |
Takeda Pharmaceutical Co., Ltd. | | | 4,800 | | | | 198,709 | |
Teva Pharmaceutical Industries Ltd. | | | 5,202 | | | | 298,204 | |
UCB SA | | | 769 | | | | 58,473 | |
Zoetis, Inc. | | | 1,846 | | | | 79,433 | |
| | | | | | | | |
| | | | | | | 11,293,667 | |
| | | | | | | | |
| | | | | | | 18,092,425 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–3.7% | | | | | | | | |
AUTO COMPONENTS–0.3% | | | | | | | | |
Aisin Seiki Co., Ltd. | | | 900 | | | | 32,336 | |
BorgWarner, Inc. | | | 830 | | | | 45,608 | |
Bridgestone Corp. | | | 3,900 | | | | 135,258 | |
Cie Generale des Etablissements Michelin–Class B | | | 1,132 | | | | 102,182 | |
Continental AG | | | 668 | | | | 140,896 | |
Delphi Automotive PLC | | | 1,141 | | | | 82,974 | |
Denso Corp. | | | 3,000 | | | | 139,823 | |
GKN PLC | | | 9,965 | | | | 53,041 | |
Goodyear Tire & Rubber Co. (The) | | | 1,010 | | | | 28,856 | |
Johnson Controls, Inc. | | | 2,480 | | | | 119,883 | |
Koito Manufacturing Co., Ltd. | | | 1,000 | | | | 30,592 | |
NGK Spark Plug Co., Ltd. | | | 1,000 | | | | 30,385 | |
NOK Corp. | | | 700 | | | | 17,817 | |
Nokian Renkaat Oyj(d) | | | 503 | | | | 12,270 | |
Stanley Electric Co., Ltd. | | | 1,600 | | | | 34,550 | |
Sumitomo Electric Industries Ltd. | | | 4,600 | | | | 57,451 | |
Sumitomo Rubber Industries Ltd. | | | 1,200 | | | | 17,839 | |
Toyota Industries Corp. | | | 1,000 | | | | 51,252 | |
Valeo SA | | | 339 | | | | 42,182 | |
Yokohama Rubber Co., Ltd. (The) | | | 2,000 | | | | 18,211 | |
| | | | | | | | |
| | | | | | | 1,193,406 | |
| | | | | | | | |
AUTOMOBILES–0.7% | | | | | | | | |
Bayerische Motoren Werke AG | | | 2,010 | | | | 216,915 | |
Daihatsu Motor Co., Ltd.(d) | | | 1,000 | | | | 13,061 | |
Daimler AG | | | 5,845 | | | | 485,451 | |
Fiat Chrysler Automobiles NV(a) | | | 5,720 | | | | 66,465 | |
Ford Motor Co. | | | 14,470 | | | | 224,285 | |
Fuji Heavy Industries Ltd. | | | 4,000 | | | | 141,544 | |
General Motors Co. | | | 5,016 | | | | 175,108 | |
Harley-Davidson, Inc. | | | 800 | | | | 52,728 | |
Honda Motor Co., Ltd. | | | 9,900 | | | | 290,449 | |
| | | | | | | | |
Isuzu Motors Ltd. | | | 3,500 | | | $ | 42,631 | |
Mazda Motor Corp. | | | 3,200 | | | | 76,850 | |
Mitsubishi Motors Corp. | | | 3,400 | | | | 31,061 | |
Nissan Motor Co., Ltd. | | | 15,100 | | | | 131,699 | |
Peugeot SA(a) | | | 2,295 | | | | 28,119 | |
Porsche Automobil Holding SE (Preference Shares) | | | 684 | | | | 55,317 | |
Renault SA | | | 857 | | | | 62,421 | |
Suzuki Motor Corp. | | | 2,200 | | | | 65,928 | |
Toyota Motor Corp. | | | 16,600 | | | | 1,034,468 | |
Volkswagen AG | | | 140 | | | | 30,352 | |
Volkswagen AG (Preference Shares) | | | 987 | | | | 219,366 | |
Yamaha Motor Co., Ltd. | | | 1,200 | | | | 24,009 | |
| | | | | | | | |
| | | | | | | 3,468,227 | |
| | | | | | | | |
DISTRIBUTORS–0.0% | | | | | | | | |
Genuine Parts Co. | | | 560 | | | | 59,679 | |
Jardine Cycle & Carriage Ltd. | | | 1,000 | | | | 32,038 | |
| | | | | | | | |
| | | | | | | 91,717 | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–0.0% | | | | | | | | |
Benesse Holdings, Inc.(d) | | | 300 | | | | 8,902 | |
H&R Block, Inc. | | | 1,020 | | | | 34,354 | |
| | | | | | | | |
| | | | | | | 43,256 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–0.4% | | | | | | | | |
Accor SA | | | 750 | | | | 33,713 | |
Carnival Corp. | | | 1,685 | | | | 76,381 | |
Carnival PLC | | | 1,116 | | | | 50,441 | |
Chipotle Mexican Grill, Inc. –Class A(a) | | | 144 | | | | 98,569 | |
Compass Group PLC | | | 10,184 | | | | 174,074 | |
Crown Resorts Ltd. | | | 2,537 | | | | 26,091 | |
Darden Restaurants, Inc. | | | 470 | | | | 27,556 | |
Flight Centre Travel Group Ltd.(d) | | | 471 | | | | 12,468 | |
Galaxy Entertainment Group Ltd. | | | 8,911 | | | | 49,516 | |
Genting Singapore PLC | | | 22,000 | | | | 17,837 | |
InterContinental Hotels Group PLC | | | 1,433 | | | | 57,659 | |
Marriott International, Inc./DE–Class A | | | 795 | | | | 62,034 | |
McDonald’s Corp. | | | 3,680 | | | | 344,816 | |
McDonald’s Holdings Co. Japan Ltd.(d) | | | 500 | | | | 10,944 | |
Merlin Entertainments PLC(e) | | | 3,228 | | | | 19,974 | |
MGM China Holdings Ltd. | | | 14,013 | | | | 35,382 | |
Oriental Land Co., Ltd./Japan | | | 300 | | | | 69,184 | |
Royal Caribbean Cruises Ltd. | | | 627 | | | | 51,684 | |
Sands China Ltd. | | | 10,875 | | | | 53,010 | |
SJM Holdings Ltd. | | | 13,014 | | | | 20,474 | |
Sodexo SA | | | 572 | | | | 55,990 | |
Starbucks Corp. | | | 2,810 | | | | 230,561 | |
Starwood Hotels & Resorts Worldwide, Inc. | | | 695 | | | | 56,344 | |
Tatts Group Ltd. | | | 6,512 | | | | 18,315 | |
12
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
TUI AG(a) | | | 2,748 | | | $ | 45,828 | |
TUI AG (Dividend)(a) | | | 952 | | | | 15,298 | |
Whitbread PLC | | | 1,102 | | | | 81,555 | |
William Hill PLC | | | 3,391 | | | | 19,054 | |
Wyndham Worldwide Corp. | | | 450 | | | | 38,592 | |
Wynn Macau Ltd. | | | 35,799 | | | | 100,102 | |
Wynn Resorts Ltd. | | | 310 | | | | 46,116 | |
Yum! Brands, Inc. | | | 1,645 | | | | 119,838 | |
| | | | | | | | |
| | | | | | | 2,119,400 | |
| | | | | | | | |
HOUSEHOLD DURABLES–0.2% | | | | | | | | |
Casio Computer Co., Ltd.(d) | | | 800 | | | | 12,238 | |
DR Horton, Inc. | | | 1,205 | | | | 30,474 | |
Electrolux AB–Class B | | | 2,430 | | | | 71,003 | |
Garmin Ltd.(d) | | | 470 | | | | 24,830 | |
Harman International Industries, Inc. | | | 240 | | | | 25,610 | |
Iida Group Holdings Co., Ltd. | | | 2,879 | | | | 35,071 | |
Leggett & Platt, Inc. | | | 475 | | | | 20,240 | |
Lennar Corp.–Class A(d) | | | 650 | | | | 29,127 | |
Mohawk Industries, Inc.(a) | | | 250 | | | | 38,840 | |
Newell Rubbermaid, Inc. | | | 1,025 | | | | 39,042 | |
Nikon Corp. | | | 1,500 | | | | 19,930 | |
Panasonic Corp. | | | 13,400 | | | | 157,831 | |
Persimmon PLC(a) | | | 1,857 | | | | 45,355 | |
PulteGroup, Inc. | | | 1,235 | | | | 26,503 | |
Rinnai Corp. | | | 200 | | | | 13,438 | |
Sekisui Chemical Co., Ltd. | | | 2,000 | | | | 24,062 | |
Sekisui House Ltd. | | | 3,000 | | | | 39,474 | |
Sharp Corp./Japan(a)(d) | | | 9,000 | | | | 19,911 | |
Sony Corp. | | | 6,400 | | | | 130,619 | |
Whirlpool Corp. | | | 300 | | | | 58,122 | |
| | | | | | | | |
| | | | | | | 861,720 | |
| | | | | | | | |
INTERNET & CATALOG RETAIL–0.2% | | | | | | | | |
Amazon.com, Inc.(a) | | | 1,430 | | | | 443,800 | |
Expedia, Inc. | | | 382 | | | | 32,608 | |
Netflix, Inc.(a) | | | 226 | | | | 77,204 | |
Priceline Group, Inc. (The)(a) | | | 197 | | | | 224,621 | |
Rakuten, Inc. | | | 4,835 | | | | 67,235 | |
TripAdvisor, Inc.(a) | | | 412 | | | | 30,760 | |
| | | | | | | | |
| | | | | | | 876,228 | |
| | | | | | | | |
LEISURE PRODUCTS–0.0% | | | | | | | | |
Bandai Namco Holdings, Inc. | | | 900 | | | | 19,054 | |
Hasbro, Inc. | | | 400 | | | | 21,996 | |
Mattel, Inc. | | | 1,235 | | | | 38,217 | |
Sankyo Co., Ltd.(d) | | | 300 | | | | 10,291 | |
Sega Sammy Holdings, Inc. | | | 2,500 | | | | 31,985 | |
Shimano, Inc. | | | 400 | | | | 51,809 | |
| | | | | | | | |
| | | | | | | 173,352 | |
| | | | | | | | |
MEDIA–0.8% | | | | | | | | |
Altice SA(a) | | | 239 | | | | 18,873 | |
Axel Springer SE | | | 401 | | | | 24,186 | |
Cablevision Systems Corp.–Class A(d) | | | 780 | | | | 16,099 | |
CBS Corp.–Class B | | | 1,790 | | | | 99,059 | |
| | | | | | | | |
Comcast Corp.–Class A | | | 9,720 | | | $ | 563,857 | |
Dentsu, Inc. | | | 1,300 | | | | 54,654 | |
DIRECTV(a) | | | 1,865 | | | | 161,696 | |
Discovery Communications, Inc.–Class A(a) | | | 545 | | | | 18,775 | |
Discovery Communications, Inc.–Class C(a) | | | 995 | | | | 33,551 | |
Eutelsat Communications SA | | | 1,052 | | | | 34,021 | |
Gannett Co., Inc. | | | 800 | | | | 25,544 | |
Hakuhodo DY Holdings, Inc. | | | 2,490 | | | | 23,829 | |
Interpublic Group of Cos., Inc. (The) | | | 1,495 | | | | 31,051 | |
ITV PLC | | | 23,254 | | | | 77,569 | |
JCDecaux SA | | | 1,374 | | | | 47,308 | |
Kabel Deutschland Holding AG(a) | | | 201 | | | | 27,239 | |
Lagardere SCA | | | 2,184 | | | | 56,876 | |
News Corp.–Class A(a) | | | 1,808 | | | | 28,368 | |
Numericable-SFR(a) | | | 770 | | | | 38,145 | |
Omnicom Group, Inc. | | | 960 | | | | 74,371 | |
Pearson PLC | | | 4,977 | | | | 91,916 | |
ProSiebenSat.1 Media AG | | | 1,328 | | | | 55,488 | |
Publicis Groupe SA | | | 807 | | | | 57,874 | |
REA Group Ltd. | | | 1,002 | | | | 36,737 | |
Reed Elsevier NV | | | 5,063 | | | | 120,908 | |
Reed Elsevier PLC | | | 6,934 | | | | 118,446 | |
RTL Group SA | | | 312 | | | | 29,372 | |
Scripps Networks Interactive, Inc.–Class A | | | 370 | | | | 27,850 | |
SES SA | | | 1,845 | | | | 66,340 | |
Singapore Press Holdings Ltd.(d) | | | 6,000 | | | | 19,047 | |
Sky PLC | | | 6,268 | | | | 87,478 | |
Telenet Group Holding NV(a) | | | 459 | | | | 25,758 | |
Time Warner Cable, Inc.–Class A | | | 1,065 | | | | 161,944 | |
Time Warner, Inc. | | | 3,195 | | | | 272,917 | |
Toho Co., Ltd./Tokyo | | | 1,000 | | | | 22,690 | |
Twenty-First Century Fox, Inc.–Class A | | | 7,035 | | | | 270,179 | |
Viacom, Inc.–Class B | | | 1,410 | | | | 106,103 | |
Walt Disney Co. (The) | | | 5,914 | | | | 557,040 | |
WPP PLC | | | 7,999 | | | | 166,313 | |
| | | | | | | | |
| | | | | | | 3,749,471 | |
| | | | | | | | |
MULTILINE RETAIL–0.2% | | | | | | | | |
Dollar General Corp.(a) | | | 1,120 | | | | 79,184 | |
Dollar Tree, Inc.(a) | | | 750 | | | | 52,785 | |
Don Quijote Holdings Co., Ltd. | | | 500 | | | | 34,374 | |
Family Dollar Stores, Inc. | | | 355 | | | | 28,120 | |
Isetan Mitsukoshi Holdings Ltd. | | | 1,300 | | | | 16,086 | |
J Front Retailing Co., Ltd. | | | 1,500 | | | | 17,373 | |
Kohl’s Corp. | | | 780 | | | | 47,611 | |
Macy’s, Inc. | | | 1,305 | | | | 85,804 | |
Marks & Spencer Group PLC | | | 9,926 | | | | 73,496 | |
Next PLC | | | 931 | | | | 98,739 | |
Nordstrom, Inc. | | | 520 | | | | 41,283 | |
Target Corp. | | | 2,375 | | | | 180,286 | |
| | | | | | | | |
| | | | | | | 755,141 | |
| | | | | | | | |
13
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
SPECIALTY RETAIL–0.5% | | | | | | | | |
ABC-Mart, Inc. | | | 500 | | | $ | 24,194 | |
AutoNation, Inc.(a) | | | 285 | | | | 17,217 | |
AutoZone, Inc.(a) | | | 125 | | | | 77,389 | |
Bed Bath & Beyond, Inc.(a) | | | 745 | | | | 56,747 | |
Best Buy Co., Inc. | | | 1,050 | | | | 40,929 | |
CarMax, Inc.(a) | | | 820 | | | | 54,596 | |
Dixons Carphone PLC | | | 7,310 | | | | 52,683 | |
Fast Retailing Co., Ltd. | | | 300 | | | | 109,168 | |
GameStop Corp.–Class A(d) | | | 415 | | | | 14,027 | |
Gap, Inc. (The) | | | 1,005 | | | | 42,320 | |
Hennes & Mauritz AB–Class B | | | 5,764 | | | | 239,465 | |
Hikari Tsushin, Inc. | | | 200 | | | | 12,165 | |
Home Depot, Inc. (The) | | | 5,080 | | | | 533,248 | |
Inditex SA | | | 6,622 | | | | 188,895 | |
Kingfisher PLC | | | 14,379 | | | | 76,009 | |
L Brands, Inc. | | | 935 | | | | 80,924 | |
Lowe’s Cos., Inc. | | | 3,690 | | | | 253,872 | |
Nitori Holdings Co., Ltd. | | | 400 | | | | 21,491 | |
O’Reilly Automotive, Inc.(a) | | | 390 | | | | 75,122 | |
PetSmart, Inc. | | | 380 | | | | 30,892 | |
Ross Stores, Inc. | | | 800 | | | | 75,408 | |
Sanrio Co., Ltd.(d) | | | 500 | | | | 12,354 | |
Shimamura Co., Ltd. | | | 200 | | | | 17,259 | |
Sports Direct International PLC(a) | | | 1,618 | | | | 17,799 | |
Staples, Inc. | | | 2,415 | | | | 43,760 | |
Tiffany & Co. | | | 405 | | | | 43,278 | |
TJX Cos., Inc. (The) | | | 2,570 | | | | 176,251 | |
Tractor Supply Co. | | | 515 | | | | 40,592 | |
Urban Outfitters, Inc.(a) | | | 335 | | | | 11,769 | |
USS Co., Ltd. | | | 1,310 | | | | 20,128 | |
Yamada Denki Co., Ltd.(d) | | | 2,700 | | | | 9,059 | |
| | | | | | | | |
| | | | | | | 2,469,010 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–0.4% | | | | | | | | |
Adidas AG | | | 932 | | | | 64,723 | |
Asics Corp. | | | 1,000 | | | | 24,075 | |
Burberry Group PLC | | | 2,695 | | | | 68,377 | |
Christian Dior SA | | | 331 | | | | 56,647 | |
Cie Financiere Richemont SA | | | 3,169 | | | | 280,959 | |
Coach, Inc. | | | 1,030 | | | | 38,687 | |
Fossil Group, Inc.(a) | | | 169 | | | | 18,715 | |
Hermes International | | | 156 | | | | 55,549 | |
HUGO BOSS AG | | | 623 | | | | 76,213 | |
Kering | | | 338 | | | | 64,954 | |
Li & Fung Ltd. | | | 48,000 | | | | 44,938 | |
Luxottica Group SpA | | | 1,559 | | | | 85,462 | |
LVMH Moet Hennessy Louis Vuitton SA(d) | | | 1,695 | | | | 268,491 | |
Michael Kors Holdings Ltd.(a) | | | 759 | | | | 57,001 | |
NIKE, Inc.–Class B | | | 2,660 | | | | 255,759 | |
Pandora A/S | | | 700 | | | | 56,740 | |
PVH Corp. | | | 295 | | | | 37,810 | |
Ralph Lauren Corp. | | | 240 | | | | 44,438 | |
Swatch Group AG (The) | | | 137 | | | | 60,863 | |
Swatch Group AG (The) (REG) | | | 522 | | | | 45,154 | |
| | | | | | | | |
Under Armour, Inc.–Class A(a) | | | 647 | | | $ | 43,931 | |
VF Corp. | | | 1,310 | | | | 98,119 | |
| | | | | | | | |
| | | | | | | 1,847,605 | |
| | | | | | | | |
| | | | | | | 17,648,533 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–3.5% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.3% | | | | | | | | |
Alcatel-Lucent(a) | | | 12,407 | | | | 44,382 | |
Cisco Systems, Inc. | | | 19,090 | | | | 530,988 | |
F5 Networks, Inc.(a) | | | 280 | | | | 36,530 | |
Harris Corp. | | | 395 | | | | 28,369 | |
Juniper Networks, Inc. | | | 1,490 | | | | 33,257 | |
Motorola Solutions, Inc. | | | 845 | | | | 56,683 | |
Nokia Oyj | | | 22,736 | | | | 179,815 | |
QUALCOMM, Inc. | | | 6,270 | | | | 466,049 | |
Telefonaktiebolaget LM Ericsson–Class B | | | 18,476 | | | | 223,709 | |
| | | | | | | | |
| | | | | | | 1,599,782 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.3% | | | | | | | | |
Amphenol Corp.–Class A | | | 1,150 | | | | 61,882 | |
Citizen Holdings Co., Ltd. | | | 2,800 | | | | 21,544 | |
Corning, Inc. | | | 4,805 | | | | 110,179 | |
FLIR Systems, Inc. | | | 510 | | | | 16,478 | |
Hamamatsu Photonics KK | | | 600 | | | | 28,562 | |
Hexagon AB–Class B | | | 2,435 | | | | 75,119 | |
Hirose Electric Co., Ltd. | | | 300 | | | | 34,807 | |
Hitachi High-Technologies Corp. | | | 600 | | | | 17,236 | |
Hitachi Ltd. | | | 29,000 | | | | 214,042 | |
Hoya Corp. | | | 2,600 | | | | 87,945 | |
Keyence Corp. | | | 300 | | | | 133,678 | |
Kyocera Corp. | | | 1,900 | | | | 86,943 | |
Murata Manufacturing Co., Ltd. | | | 1,200 | | | | 130,945 | |
Omron Corp. | | | 1,200 | | | | 53,683 | |
Shimadzu Corp. | | | 2,000 | | | | 20,344 | |
TDK Corp. | | | 600 | | | | 35,337 | |
TE Connectivity Ltd. | | | 1,510 | | | | 95,507 | |
Yaskawa Electric Corp. | | | 2,000 | | | | 25,546 | |
Yokogawa Electric Corp. | | | 1,100 | | | | 12,070 | |
| | | | | | | | |
| | | | | | | 1,261,847 | |
| | | | | | | | |
INTERNET SOFTWARE & SERVICES–0.5% | | | | | | | | |
Akamai Technologies, Inc.(a) | | | 655 | | | | 41,239 | |
eBay, Inc.(a) | | | 4,235 | | | | 237,668 | |
Facebook, Inc.–Class A(a) | | | 7,838 | | | | 611,521 | |
Google, Inc.–Class A(a) | | | 1,089 | | | | 577,889 | |
Google, Inc.–Class C(a) | | | 1,089 | | | | 573,249 | |
Kakaku.com, Inc.(d) | | | 961 | | | | 13,749 | |
Mixi, Inc.(d) | | | 409 | | | | 15,080 | |
United Internet AG | | | 1,223 | | | | 55,090 | |
VeriSign, Inc.(a)(d) | | | 425 | | | | 24,225 | |
Yahoo Japan Corp. | | | 6,408 | | | | 22,966 | |
Yahoo!, Inc.(a) | | | 3,465 | | | | 175,017 | |
| | | | | | | | |
| | | | | | | 2,347,693 | |
| | | | | | | | |
14
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
IT SERVICES–0.5% | | | | | | | | |
Accenture PLC–Class A | | | 2,385 | | | $ | 213,004 | |
Alliance Data Systems Corp.(a) | | | 230 | | | | 65,792 | |
Amadeus IT Holding SA–Class A | | | 2,581 | | | | 102,794 | |
AtoS | | | 677 | | | | 53,791 | |
Automatic Data Processing, Inc. | | | 1,820 | | | | 151,733 | |
Cap Gemini SA | | | 854 | | | | 61,076 | |
Cognizant Technology Solutions Corp.–Class A(a) | | | 2,280 | | | | 120,065 | |
Computer Sciences Corp. | | | 540 | | | | 34,047 | |
Computershare Ltd. | | | 3,663 | | | | 35,039 | |
Fidelity National Information Services, Inc. | | | 1,070 | | | | 66,554 | |
Fiserv, Inc.(a) | | | 950 | | | | 67,422 | |
Fujitsu Ltd. | | | 11,000 | | | | 58,648 | |
International Business Machines Corp. | | | 3,476 | | | | 557,689 | |
MasterCard, Inc.–Class A | | | 3,710 | | | | 319,654 | |
Nomura Research Institute Ltd. | | | 600 | | | | 18,351 | |
NTT Data Corp. | | | 500 | | | | 18,627 | |
Otsuka Corp. | | | 600 | | | | 19,025 | |
Paychex, Inc. | | | 1,195 | | | | 55,173 | |
Teradata Corp.(a) | | | 545 | | | | 23,806 | |
Total System Services, Inc. | | | 610 | | | | 20,716 | |
Visa, Inc.–Class A | | | 1,875 | | | | 491,625 | |
Western Union Co. (The)–Class W | | | 1,930 | | | | 34,566 | |
Xerox Corp. | | | 4,045 | | | | 56,064 | |
| | | | | | | | |
| | | | | | | 2,645,261 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–0.4% | | | | | | | | |
Altera Corp. | | | 1,110 | | | | 41,003 | |
Analog Devices, Inc. | | | 1,180 | | | | 65,514 | |
Applied Materials, Inc. | | | 4,535 | | | | 113,012 | |
ARM Holdings PLC | | | 8,527 | | | | 130,995 | |
ASM Pacific Technology Ltd. | | | 900 | | | | 8,569 | |
ASML Holding NV | | | 1,801 | | | | 194,594 | |
Avago Technologies Ltd. | | | 926 | | | | 93,146 | |
Broadcom Corp.–Class A | | | 2,020 | | | | 87,527 | |
Infineon Technologies AG | | | 4,860 | | | | 51,428 | |
Intel Corp. | | | 18,540 | | | | 672,817 | |
KLA-Tencor Corp. | | | 610 | | | | 42,895 | |
Lam Research Corp. | | | 629 | | | | 49,905 | |
Linear Technology Corp. | | | 890 | | | | 40,584 | |
Microchip Technology, Inc. | | | 745 | | | | 33,607 | |
Micron Technology, Inc.(a) | | | 3,970 | | | | 138,990 | |
NVIDIA Corp. | | | 1,885 | | | | 37,794 | |
Rohm Co., Ltd. | | | 400 | | | | 24,101 | |
STMicroelectronics NV | | | 4,174 | | | | 31,144 | |
Texas Instruments, Inc. | | | 3,975 | | | | 212,523 | |
Tokyo Electron Ltd. | | | 800 | | | | 60,664 | |
Xilinx, Inc. | | | 985 | | | | 42,641 | |
| | | | | | | | |
| | | | | | | 2,173,453 | |
| | | | | | | | |
SOFTWARE–0.7% | | | | | | | | |
Adobe Systems, Inc.(a) | | | 1,760 | | | | 127,952 | |
Autodesk, Inc.(a) | | | 825 | | | | 49,549 | |
| | | | | | | | |
CA, Inc. | | | 1,185 | | | $ | 36,083 | |
Citrix Systems, Inc.(a) | | | 630 | | | | 40,194 | |
COLOPL, Inc. | | | 1,046 | | | | 23,506 | |
Dassault Systemes | | | 924 | | | | 56,346 | |
Electronic Arts, Inc.(a) | | | 1,135 | | | | 53,362 | |
Gemalto NV(d) | | | 323 | | | | 26,361 | |
GungHo Online Entertainment, Inc.(d) | | | 4,000 | | | | 14,482 | |
Intuit, Inc. | | | 1,050 | | | | 96,799 | |
Konami Corp. | | | 1,300 | | | | 23,833 | |
Microsoft Corp. | | | 30,920 | | | | 1,436,234 | |
Nexon Co., Ltd. | | | 2,595 | | | | 24,191 | |
NICE-Systems Ltd. | | | 208 | | | | 10,519 | |
Nintendo Co., Ltd. | | | 600 | | | | 62,615 | |
Oracle Corp. | | | 12,200 | | | | 548,634 | |
Oracle Corp. Japan(d) | | | 500 | | | | 20,373 | |
Red Hat, Inc.(a) | | | 690 | | | | 47,707 | |
Sage Group PLC (The) | | | 6,586 | | | | 47,568 | |
Salesforce.com, Inc.(a) | | | 2,134 | | | | 126,568 | |
SAP SE | | | 5,594 | | | | 390,620 | |
Symantec Corp. | | | 2,555 | | | | 65,549 | |
Trend Micro, Inc./Japan(d) | | | 500 | | | | 13,817 | |
| | | | | | | | |
| | | | | | | 3,342,862 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–0.8% | | | | | | | | |
Apple, Inc. | | | 22,202 | | | | 2,450,657 | |
Brother Industries Ltd. | | | 800 | | | | 14,502 | |
Canon, Inc.(d) | | | 6,900 | | | | 219,308 | |
EMC Corp./MA | | | 7,555 | | | | 224,686 | |
Fujifilm Holdings Corp. | | | 2,800 | | | | 85,438 | |
Hewlett-Packard Co. | | | 6,960 | | | | 279,305 | |
Konica Minolta, Inc. | | | 2,000 | | | | 21,792 | |
NEC Corp. | | | 16,000 | | | | 46,496 | |
NetApp, Inc. | | | 1,190 | | | | 49,325 | |
Ricoh Co., Ltd. | | | 4,000 | | | | 40,436 | |
SanDisk Corp. | | | 870 | | | | 85,243 | |
Seagate Technology PLC | | | 1,200 | | | | 79,800 | |
Seiko Epson Corp. | | | 600 | | | | 25,106 | |
Western Digital Corp. | | | 830 | | | | 91,881 | |
| | | | | | | | |
| | | | | | | 3,713,975 | |
| | | | | | | | |
| | | | | | | 17,084,873 | |
| | | | | | | | |
INDUSTRIALS–3.5% | | | | | | | | |
AEROSPACE & DEFENSE–0.6% | | | | | | | | |
Airbus Group NV | | | 3,570 | | | | 176,494 | |
BAE Systems PLC | | | 19,161 | | | | 140,128 | |
Boeing Co. (The) | | | 2,510 | | | | 326,250 | |
Cobham PLC | | | 7,675 | | | | 38,529 | |
General Dynamics Corp. | | | 1,210 | | | | 166,520 | |
Honeywell International, Inc. | | | 2,955 | | | | 295,264 | |
L-3 Communications Holdings, Inc. | | | 325 | | | | 41,018 | |
Lockheed Martin Corp. | | | 1,050 | | | | 202,199 | |
Meggitt PLC | | | 4,891 | | | | 39,344 | |
Northrop Grumman Corp. | | | 790 | | | | 116,438 | |
Precision Castparts Corp. | | | 540 | | | | 130,075 | |
Raytheon Co. | | | 1,150 | | | | 124,396 | |
15
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Rockwell Collins, Inc. | | | 500 | | | $ | 42,240 | |
Rolls-Royce Holdings PLC(a) | | | 11,452 | | | | 153,844 | |
Safran SA | | | 1,646 | | | | 101,550 | |
Singapore Technologies Engineering Ltd. | | | 19,000 | | | | 48,632 | |
Textron, Inc. | | | 1,005 | | | | 42,321 | |
Thales SA | | | 694 | | | | 37,550 | |
United Technologies Corp. | | | 3,225 | | | | 370,875 | |
Zodiac Aerospace | | | 1,135 | | | | 38,213 | |
| | | | | | | | |
| | | | | | | 2,631,880 | |
| | | | | | | | |
AIR FREIGHT & LOGISTICS–0.2% | | | | | | | | |
Bollore SA | | | 11,606 | | | | 52,855 | |
CH Robinson Worldwide, Inc. | | | 565 | | | | 42,313 | |
Deutsche Post AG | | | 5,875 | | | | 190,713 | |
Expeditors International of Washington, Inc. | | | 720 | | | | 32,119 | |
FedEx Corp. | | | 1,015 | | | | 176,265 | |
Kuehne & Nagel International AG | | | 432 | | | | 58,681 | |
Royal Mail PLC | | | 2,926 | | | | 19,499 | |
United Parcel Service, Inc.–Class B | | | 2,655 | | | | 295,156 | |
Yamato Holdings Co., Ltd. | | | 2,200 | | | | 43,564 | |
| | | | | | | | |
| | | | | | | 911,165 | |
| | | | | | | | |
AIRLINES–0.1% | | | | | | | | |
ANA Holdings, Inc. | | | 8,000 | | | | 19,781 | |
Cathay Pacific Airways Ltd. | | | 20,000 | | | | 43,535 | |
Delta Air Lines, Inc. | | | 3,152 | | | | 155,047 | |
Deutsche Lufthansa AG (REG) | | | 3,330 | | | | 55,181 | |
easyJet PLC | | | 964 | | | | 24,948 | |
International Consolidated Airlines Group SA(a) | | | 6,202 | | | | 46,200 | |
Japan Airlines Co., Ltd. | | | 900 | | | | 26,684 | |
Singapore Airlines Ltd. | | | 3,000 | | | | 26,200 | |
Southwest Airlines Co. | | | 2,555 | | | | 108,128 | |
| | | | | | | | |
| | | | | | | 505,704 | |
| | | | | | | | |
BUILDING PRODUCTS–0.1% | | | | | | | | |
Allegion PLC | | | 335 | | | | 18,579 | |
Asahi Glass Co., Ltd.(d) | | | 4,000 | | | | 19,473 | |
Assa Abloy AB–Class B | | | 1,164 | | | | 61,478 | |
Cie de Saint-Gobain | | | 2,759 | | | | 116,873 | |
Daikin Industries Ltd. | | | 1,400 | | | | 89,774 | |
Geberit AG | | | 168 | | | | 56,835 | |
LIXIL Group Corp. | | | 1,200 | | | | 25,255 | |
Masco Corp. | | | 1,305 | | | | 32,886 | |
TOTO Ltd. | | | 2,000 | | | | 23,265 | |
| | | | | | | | |
| | | | | | | 444,418 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–0.1% | | | | | | | | |
ADT Corp. (The)(d) | | | 647 | | | | 23,441 | |
Aggreko PLC | | | 1,141 | | | | 26,608 | |
Babcock International Group PLC | | | 1,139 | | | | 18,659 | |
Brambles Ltd. | | | 9,492 | | | | 81,766 | |
Cintas Corp. | | | 335 | | | | 26,277 | |
| | | | | | | | |
Dai Nippon Printing Co., Ltd. | | | 3,000 | | | $ | 27,020 | |
Edenred | | | 818 | | | | 22,623 | |
G4S PLC | | | 12,380 | | | | 53,403 | |
ISS A/S(a) | | | 954 | | | | 27,383 | |
Pitney Bowes, Inc. | | | 705 | | | | 17,181 | |
Republic Services, Inc.–Class A | | | 950 | | | | 38,237 | |
Secom Co., Ltd. | | | 1,300 | | | | 74,691 | |
Societe BIC SA | | | 221 | | | | 29,376 | |
Stericycle, Inc.(a) | | | 310 | | | | 40,635 | |
Toppan Printing Co., Ltd. | | | 2,000 | | | | 12,995 | |
Tyco International PLC | | | 1,645 | | | | 72,150 | |
Waste Management, Inc. | | | 1,595 | | | | 81,855 | |
| | | | | | | | |
| | | | | | | 674,300 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–0.1% | | | | | | | | |
ACS Actividades de Construccion y Servicios SA | | | 1,064 | | | | 37,086 | |
Bouygues SA | | | 1,739 | | | | 62,792 | |
Chiyoda Corp. | | | 4,000 | | | | 33,140 | |
Ferrovial SA | | | 1,957 | | | | 38,686 | |
Fluor Corp. | | | 565 | | | | 34,256 | |
Jacobs Engineering Group, Inc.(a) | | | 465 | | | | 20,781 | |
JGC Corp. | | | 1,000 | | | | 20,587 | |
Kajima Corp. | | | 7,000 | | | | 28,786 | |
Leighton Holdings Ltd. | | | 1,344 | | | | 24,472 | |
Obayashi Corp. | | | 3,000 | | | | 19,339 | |
OCI NV(a) | | | 320 | | | | 11,126 | |
Quanta Services, Inc.(a) | | | 765 | | | | 21,718 | |
Shimizu Corp. | | | 4,000 | | | | 27,168 | |
Skanska AB–Class B | | | 3,301 | | | | 70,874 | |
Taisei Corp. | | | 5,000 | | | | 28,360 | |
Vinci SA | | | 2,970 | | | | 162,170 | |
| | | | | | | | |
| | | | | | | 641,341 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–0.3% | | | | | | | | |
ABB Ltd. (REG)(a) | | | 13,350 | | | | 282,461 | |
Alstom SA(a) | | | 1,012 | | | | 32,640 | |
AMETEK, Inc. | | | 899 | | | | 47,314 | |
Eaton Corp. PLC | | | 1,794 | | | | 121,920 | |
Emerson Electric Co. | | | 2,600 | | | | 160,498 | |
First Solar, Inc.(a) | | | 270 | | | | 12,041 | |
Fuji Electric Co., Ltd. | | | 4,000 | | | | 15,948 | |
Legrand SA | | | 1,194 | | | | 62,635 | |
Mitsubishi Electric Corp. | | | 12,000 | | | | 142,537 | |
Nidec Corp. | | | 1,300 | | | | 83,961 | |
Osram Licht AG(a) | | | 292 | | | | 11,464 | |
Prysmian SpA | | | 1,074 | | | | 19,572 | |
Rockwell Automation, Inc. | | | 530 | | | | 58,936 | |
Schneider Electric SE (Paris) | | | 3,189 | | | | 232,252 | |
Vestas Wind Systems A/S(a) | | | 1,008 | | | | 36,607 | |
| | | | | | | | |
| | | | | | | 1,320,786 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–0.6% | | | | | | | | |
3M Co. | | | 2,455 | | | | 403,406 | |
Danaher Corp. | | | 2,290 | | | | 196,276 | |
General Electric Co. | | | 37,620 | | | | 950,657 | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Hutchison Whampoa Ltd. | | | 10,000 | | | $ | 114,444 | |
Keihan Electric Railway Co., Ltd. | | | 5,000 | | | | 26,756 | |
Keppel Corp., Ltd. | | | 13,000 | | | | 86,650 | |
Koninklijke Philips NV | | | 7,299 | | | | 211,569 | |
Roper Industries, Inc. | | | 375 | | | | 58,631 | |
Seibu Holdings, Inc.(d) | | | 955 | | | | 19,470 | |
Siemens AG | | | 4,814 | | | | 540,150 | |
Smiths Group PLC | | | 2,461 | | | | 41,847 | |
Toshiba Corp. | | | 24,000 | | | | 101,215 | |
| | | | | | | | |
| | | | | | | 2,751,071 | |
| | | | | | | | |
MACHINERY–0.7% | | | | | | | | |
Alfa Laval AB | | | 3,611 | | | | 68,283 | |
Amada Co., Ltd. | | | 3,000 | | | | 25,706 | |
Andritz AG | | | 485 | | | | 26,663 | |
Atlas Copco AB–Class A | | | 3,037 | | | | 84,506 | |
Atlas Copco AB–Class B | | | 3,579 | | | | 91,615 | |
Caterpillar, Inc. | | | 2,385 | | | | 218,299 | |
CNH Industrial NV | | | 8,194 | | | | 66,331 | |
Cummins, Inc. | | | 650 | | | | 93,711 | |
Deere & Co. | | | 1,335 | | | | 118,107 | |
Dover Corp. | | | 635 | | | | 45,542 | |
FANUC Corp. | | | 1,200 | | | | 197,856 | |
Flowserve Corp. | | | 510 | | | | 30,513 | |
GEA Group AG | | | 896 | | | | 39,394 | |
Hino Motors Ltd. | | | 2,000 | | | | 26,327 | |
Hitachi Construction Machinery Co., Ltd. | | | 700 | | | | 14,800 | |
IHI Corp. | | | 8,000 | | | | 40,516 | |
Illinois Tool Works, Inc. | | | 1,375 | | | | 130,213 | |
IMI PLC | | | 1,648 | | | | 32,241 | |
Ingersoll-Rand PLC | | | 1,005 | | | | 63,707 | |
Joy Global, Inc. | | | 385 | | | | 17,910 | |
JTEKT Corp. | | | 1,400 | | | | 23,562 | |
Kawasaki Heavy Industries Ltd. | | | 9,000 | | | | 40,928 | |
Komatsu Ltd. | | | 5,700 | | | | 126,015 | |
Kone Oyj–Class B | | | 1,900 | | | | 86,503 | |
Kubota Corp. | | | 7,000 | | | | 101,603 | |
Kurita Water Industries Ltd. | | | 1,200 | | | | 25,023 | |
Makita Corp. | | | 700 | | | | 31,543 | |
MAN SE | | | 407 | | | | 45,327 | |
Melrose Industries PLC | | | 4,948 | | | | 20,482 | |
Metso Oyj | | | 571 | | | | 17,096 | |
Minebea Co. Ltd. | | | 2,000 | | | | 29,536 | |
Mitsubishi Heavy Industries Ltd. | | | 18,000 | | | | 99,335 | |
Nabtesco Corp. | | | 1,000 | | | | 24,169 | |
NGK Insulators Ltd. | | | 2,000 | | | | 40,997 | |
NSK Ltd. | | | 2,000 | | | | 23,613 | |
PACCAR, Inc. | | | 1,310 | | | | 89,093 | |
Pall Corp. | | | 395 | | | | 39,978 | |
Parker-Hannifin Corp. | | | 545 | | | | 70,278 | |
Pentair PLC | | | 710 | | | | 47,158 | |
Sandvik AB | | | 12,165 | | | | 118,281 | |
Schindler Holding AG | | | 413 | | | | 59,622 | |
Schindler Holding AG (REG) | | | 271 | | | | 38,870 | |
SembCorp Marine Ltd.(d) | | | 7,000 | | | | 17,176 | |
SKF AB–Class B | | | 1,658 | | | | 34,927 | |
SMC Corp./Japan | | | 300 | | | | 78,667 | |
| | | | | | | | |
Snap-On, Inc. | | | 220 | | | $ | 30,083 | |
Stanley Black & Decker, Inc. | | | 615 | | | | 59,089 | |
Sumitomo Heavy Industries Ltd. | | | 6,000 | | | | 32,274 | |
THK Co., Ltd. | | | 800 | | | | 19,226 | |
Vallourec SA(d) | | | 641 | | | | 17,372 | |
Volvo AB–Class B | | | 6,759 | | | | 72,886 | |
Wartsila Oyj Abp | | | 793 | | | | 35,493 | |
Weir Group PLC (The) | | | 950 | | | | 27,242 | |
Xylem, Inc./NY | | | 685 | | | | 26,078 | |
Zardoya Otis SA | | | 2,136 | | | | 23,687 | |
| | | | | | | | |
| | | | | | | 3,105,452 | |
| | | | | | | | |
MARINE–0.0% | | | | | | | | |
AP Moeller–Maersk A/S–Class A | | | 15 | | | | 28,704 | |
AP Moeller–Maersk A/S–Class B | | | 43 | | | | 85,525 | |
Mitsui OSK Lines Ltd. | | | 12,000 | | | | 35,553 | |
Nippon Yusen KK | | | 10,000 | | | | 28,245 | |
| | | | | | | | |
| | | | | | | 178,027 | |
| | | | | | | | |
PROFESSIONAL SERVICES–0.1% | | | | | | | | |
Adecco SA(a) | | | 1,033 | | | | 71,008 | |
Bureau Veritas SA | | | 1,236 | | | | 27,385 | |
Capita PLC | | | 4,013 | | | | 67,289 | |
Dun & Bradstreet Corp. (The) | | | 165 | | | | 19,958 | |
Equifax, Inc. | | | 455 | | | | 36,796 | |
Experian PLC | | | 6,015 | | | | 101,394 | |
Intertek Group PLC | | | 720 | | | | 26,058 | |
Nielsen NV | | | 1,116 | | | | 49,919 | |
Randstad Holding NV | | | 1,613 | | | | 77,612 | |
Recruit Holdings Co., Ltd.(a) | | | 653 | | | | 18,754 | |
Robert Half International, Inc. | | | 485 | | | | 28,314 | |
SGS SA | | | 24 | | | | 49,007 | |
| | | | | | | | |
| | | | | | | 573,494 | |
| | | | | | | | |
ROAD & RAIL–0.3% | | | | | | | | |
Asciano Ltd. | | | 8,374 | | | | 41,010 | |
Aurizon Holdings Ltd. | | | 12,975 | | | | 48,556 | |
Central Japan Railway Co. | | | 875 | | | | 131,142 | |
CSX Corp. | | | 3,710 | | | | 134,413 | |
DSV A/S | | | 1,630 | | | | 49,632 | |
East Japan Railway Co. | | | 2,000 | | | | 150,742 | |
Hankyu Hanshin Holdings, Inc. | | | 5,000 | | | | 26,820 | |
Kansas City Southern | | | 420 | | | | 51,253 | |
Keikyu Corp.(d) | | | 2,000 | | | | 14,797 | |
Keio Corp. | | | 3,000 | | | | 21,581 | |
Keisei Electric Railway Co., Ltd. | | | 2,000 | | | | 24,319 | |
Kintetsu Corp. | | | 8,000 | | | | 26,303 | |
MTR Corp., Ltd. | | | 15,500 | | | | 63,415 | |
Nagoya Railroad Co., Ltd. | | | 4,000 | | | | 14,893 | |
Nippon Express Co., Ltd. | | | 3,000 | | | | 15,203 | |
Norfolk Southern Corp. | | | 1,190 | | | | 130,436 | |
Odakyu Electric Railway Co., Ltd. | | | 4,000 | | | | 35,432 | |
Ryder System, Inc. | | | 215 | | | | 19,963 | |
Tobu Railway Co., Ltd. | | | 6,000 | | | | 25,657 | |
Tokyu Corp. | | | 5,000 | | | | 30,982 | |
Union Pacific Corp. | | | 3,400 | | | | 405,042 | |
West Japan Railway Co. | | | 751 | | | | 35,506 | |
| | | | | | | | |
| | | | | | | 1,497,097 | |
| | | | | | | | |
17
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–0.2% | | | | | | | | |
Ashtead Group PLC | | | 3,056 | | | $ | 54,274 | |
Brenntag AG | | | 567 | | | | 31,701 | |
Bunzl PLC | | | 2,030 | | | | 55,494 | |
Fastenal Co.(d) | | | 1,030 | | | | 48,987 | |
ITOCHU Corp. | | | 9,000 | | | | 96,076 | |
Marubeni Corp. | | | 10,000 | | | | 59,834 | |
Mitsubishi Corp. | | | 8,400 | | | | 153,721 | |
Mitsui & Co., Ltd. | | | 10,400 | | | | 139,289 | |
Noble Group Ltd. | | | 24,000 | | | | 20,475 | |
Sumitomo Corp. | | | 6,800 | | | | 69,841 | |
Toyota Tsusho Corp. | | | 1,300 | | | | 30,199 | |
Travis Perkins PLC | | | 1,926 | | | | 55,438 | |
United Rentals, Inc.(a) | | | 350 | | | | 35,703 | |
Wolseley PLC | | | 1,840 | | | | 105,196 | |
WW Grainger, Inc. | | | 230 | | | | 58,625 | |
| | | | | | | | |
| | | | | | | 1,014,853 | |
| | | | | | | | |
TRANSPORTATION INFRASTRUCTURE–0.1% | | | | | | | | |
Abertis Infraestructuras SA | | | 2,454 | | | | 48,662 | |
Aeroports de Paris | | | 305 | | | | 36,882 | |
Atlantia SpA | | | 2,911 | | | | 67,658 | |
Auckland International Airport Ltd. | | | 6,289 | | | | 20,693 | |
Groupe Eurotunnel SA | | | 2,068 | | | | 26,698 | |
Hutchison Port Holdings Trust–Class U | | | 43,553 | | | | 29,932 | |
Kamigumi Co., Ltd. | | | 3,000 | | | | 26,724 | |
Mitsubishi Logistics Corp. | | | 1,000 | | | | 14,544 | |
Sydney Airport | | | 15,829 | | | | 60,601 | |
Transurban Group | | | 10,995 | | | | 76,621 | |
| | | | | | | | |
| | | | | | | 409,015 | |
| | | | | | | | |
| | | | | | | 16,658,603 | |
| | | | | | | | |
CONSUMER STAPLES–3.1% | | | | | | | | |
BEVERAGES–0.7% | | | | | | | | |
Anheuser-Busch InBev NV | | | 4,882 | | | | 549,427 | |
Asahi Group Holdings Ltd. | | | 2,300 | | | | 71,156 | |
Brown-Forman Corp.–Class B | | | 602 | | | | 52,880 | |
Carlsberg A/S–Class B | | | 695 | | | | 53,376 | |
Coca-Cola Amatil Ltd. | | | 3,316 | | | | 25,036 | |
Coca-Cola Co. (The) | | | 14,780 | | | | 624,011 | |
Coca-Cola Enterprises, Inc. | | | 850 | | | | 37,587 | |
Coca-Cola HBC AG(a) | | | 892 | | | | 16,983 | |
Constellation Brands, Inc.–Class A(a) | | | 620 | | | | 60,865 | |
Diageo PLC | | | 15,252 | | | | 436,925 | |
Dr Pepper Snapple Group, Inc. | | | 720 | | | | 51,610 | |
Heineken NV | | | 1,401 | | | | 99,482 | |
Kirin Holdings Co., Ltd. | | | 5,000 | | | | 62,129 | |
Molson Coors Brewing Co.–Class B | | | 600 | | | | 44,712 | |
Monster Beverage Corp.(a) | | | 560 | | | | 60,676 | |
PepsiCo, Inc. | | | 5,675 | | | | 536,628 | |
Pernod Ricard SA | | | 1,289 | | | | 143,256 | |
Remy Cointreau SA | | | 195 | | | | 13,010 | |
SABMiller PLC (London) | | | 5,871 | | | | 306,062 | |
| | | | | | | | |
Suntory Beverage & Food Ltd.(d) | | | 848 | | | $ | 29,298 | |
Treasury Wine Estates Ltd. | | | 5,315 | | | | 20,515 | |
| | | | | | | | |
| | | | | | | 3,295,624 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–0.6% | | | | | | | | |
Aeon Co., Ltd. | | | 4,000 | | | | 40,198 | |
Carrefour SA | | | 3,792 | | | | 115,396 | |
Casino Guichard Perrachon SA | | | 482 | | | | 44,327 | |
Colruyt SA | | | 393 | | | | 18,270 | |
Costco Wholesale Corp. | | | 1,665 | | | | 236,014 | |
CVS Health Corp. | | | 4,330 | | | | 417,022 | |
Delhaize Group SA | | | 624 | | | | 45,443 | |
Distribuidora Internacional de Alimentacion SA | | | 4,415 | | | | 29,916 | |
FamilyMart Co., Ltd. | | | 400 | | | | 15,066 | |
J Sainsbury PLC(d) | | | 5,506 | | | | 21,026 | |
Jeronimo Martins SGPS SA | | | 1,190 | | | | 11,924 | |
Koninklijke Ahold NV | | | 5,462 | | | | 97,075 | |
Kroger Co. (The) | | | 1,815 | | | | 116,541 | |
Lawson, Inc. | | | 600 | | | | 36,257 | |
Metro AG(a) | | | 1,551 | | | | 47,411 | |
Safeway, Inc. | | | 845 | | | | 29,676 | |
Seven & I Holdings Co., Ltd. | | | 4,600 | | | | 165,468 | |
Sysco Corp. | | | 2,155 | | | | 85,532 | |
Tesco PLC | | | 49,315 | | | | 143,788 | |
Wal-Mart Stores, Inc. | | | 5,913 | | | | 507,809 | |
Walgreens Boots Alliance, Inc. | | | 3,295 | | | | 251,079 | |
Wesfarmers Ltd. | | | 6,821 | | | | 230,943 | |
Whole Foods Market, Inc. | | | 1,320 | | | | 66,554 | |
WM Morrison Supermarkets PLC | | | 18,352 | | | | 52,363 | |
Woolworths Ltd. | | | 7,649 | | | | 190,075 | |
| | | | | | | | |
| | | | | | | 3,015,173 | |
| | | | | | | | |
FOOD PRODUCTS–0.9% | | | | | | | | |
Ajinomoto Co., Inc. | | | 3,000 | | | | 55,851 | |
Archer-Daniels-Midland Co. | | | 2,415 | | | | 125,580 | |
Aryzta AG(a) | | | 470 | | | | 36,119 | |
Associated British Foods PLC | | | 2,163 | | | | 105,747 | |
Barry Callebaut AG(a) | | | 25 | | | | 25,631 | |
Calbee, Inc. | | | 698 | | | | 24,044 | |
Campbell Soup Co. | | | 675 | | | | 29,700 | |
Chocoladefabriken Lindt & Sprungli AG (REG) | | | 1 | | | | 57,702 | |
ConAgra Foods, Inc. | | | 1,585 | | | | 57,504 | |
Danone SA | | | 3,518 | | | | 230,000 | |
General Mills, Inc. | | | 2,285 | | | | 121,859 | |
Golden Agri-Resources Ltd. | | | 48,000 | | | | 16,613 | |
Hershey Co. (The) | | | 550 | | | | 57,161 | |
Hormel Foods Corp. | | | 475 | | | | 24,747 | |
JM Smucker Co. (The) | | | 395 | | | | 39,887 | |
Kellogg Co. | | | 965 | | | | 63,150 | |
Kerry Group PLC–Class A | | | 961 | | | | 66,392 | |
Keurig Green Mountain, Inc. | | | 478 | | | | 63,285 | |
Kikkoman Corp. | | | 1,000 | | | | 24,509 | |
Kraft Foods Group, Inc. | | | 2,228 | | | | 139,606 | |
McCormick & Co., Inc./MD | | | 475 | | | | 35,292 | |
Mead Johnson Nutrition Co.–Class A | | | 760 | | | | 76,410 | |
18
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MEIJI Holdings Co., Ltd. | | | 300 | | | $ | 27,294 | |
Mondelez International, Inc.–Class A | | | 6,285 | | | | 228,303 | |
Nestle SA | | | 19,578 | | | | 1,427,255 | |
NH Foods Ltd. | | | 1,000 | | | | 21,878 | |
Nisshin Seifun Group, Inc. | | | 1,500 | | | | 14,521 | |
Nissin Foods Holdings Co., Ltd. | | | 400 | | | | 19,065 | |
Orkla ASA | | | 5,657 | | | | 38,510 | |
Tate & Lyle PLC | | | 2,078 | | | | 19,470 | |
Toyo Suisan Kaisha Ltd. | | | 1,000 | | | | 32,199 | |
Tyson Foods, Inc.–Class A | | | 1,075 | | | | 43,097 | |
Unilever NV | | | 9,903 | | | | 387,383 | |
Unilever PLC | | | 7,792 | | | | 316,575 | |
Wilmar International Ltd. | | | 9,000 | | | | 21,930 | |
Yakult Honsha Co., Ltd. | | | 400 | | | | 21,114 | |
| | | | | | | | |
| | | | | | | 4,095,383 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–0.4% | | | | | | | | |
Clorox Co. (The) | | | 470 | | | | 48,979 | |
Colgate-Palmolive Co. | | | 3,200 | | | | 221,408 | |
Henkel AG & Co. KGaA | | | 579 | | | | 56,087 | |
Henkel AG & Co. KGaA (Preference Shares) | | | 1,082 | | | | 116,550 | |
Kimberly-Clark Corp. | | | 1,415 | | | | 163,489 | |
Procter & Gamble Co. (The) | | | 10,165 | | | | 925,930 | |
Reckitt Benckiser Group PLC | | | 3,945 | | | | 319,521 | |
Svenska Cellulosa AB SCA–Class B | | | 4,979 | | | | 107,341 | |
Unicharm Corp. | | | 2,300 | | | | 55,129 | |
| | | | | | | | |
| | | | | | | 2,014,434 | |
| | | | | | | | |
PERSONAL PRODUCTS–0.1% | | | | | | | | |
Avon Products, Inc. | | | 1,555 | | | | 14,602 | |
Beiersdorf AG | | | 630 | | | | 51,152 | |
Estee Lauder Cos., Inc. (The)–Class A | | | 840 | | | | 64,008 | |
Kao Corp. | | | 3,100 | | | | 122,247 | |
L’Oreal SA | | | 1,526 | | | | 255,409 | |
Shiseido Co., Ltd. | | | 1,600 | | | | 22,439 | |
| | | | | | | | |
| | | | | | | 529,857 | |
| | | | | | | | |
TOBACCO–0.4% | | | | | | | | |
Altria Group, Inc. | | | 7,410 | | | | 365,091 | |
British American Tobacco PLC | | | 11,316 | | | | 613,225 | |
Imperial Tobacco Group PLC | | | 5,811 | | | | 255,797 | |
Japan Tobacco, Inc. | | | 6,678 | | | | 183,797 | |
Lorillard, Inc. | | | 1,340 | | | | 84,340 | |
Philip Morris International, Inc. | | | 5,850 | | | | 476,482 | |
Reynolds American, Inc. | | | 1,135 | | | | 72,946 | |
Swedish Match AB | | | 831 | | | | 26,039 | |
| | | | | | | | |
| | | | | | | 2,077,717 | |
| | | | | | | | |
| | | | | | | 15,028,188 | |
| | | | | | | | |
ENERGY–2.1% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.3% | | | | | | | | |
Amec Foster Wheeler PLC | | | 1,606 | | | | 21,210 | |
Baker Hughes, Inc. | | | 1,610 | | | | 90,273 | |
Cameron International Corp.(a) | | | 770 | | | | 38,461 | |
| | | | | | | | |
Diamond Offshore Drilling, Inc.(d) | | | 240 | | | $ | 8,810 | |
Ensco PLC–Class A(d) | | | 850 | | | | 25,457 | |
FMC Technologies, Inc.(a) | | | 860 | | | | 40,282 | |
Halliburton Co.(d) | | | 3,190 | | | | 125,463 | |
Helmerich & Payne, Inc. | | | 435 | | | | 29,328 | |
Nabors Industries Ltd. | | | 1,065 | | | | 13,824 | |
National Oilwell Varco, Inc. | | | 1,605 | | | | 105,176 | |
Noble Corp. PLC | | | 925 | | | | 15,327 | |
Petrofac Ltd. | | | 3,159 | | | | 34,414 | |
Saipem SpA(a) | | | 1,479 | | | | 15,504 | |
Schlumberger Ltd. | | | 4,885 | | | | 417,228 | |
Seadrill Ltd.(d) | | | 3,774 | | | | 43,666 | |
Subsea 7 SA(d) | | | 1,066 | | | | 10,908 | |
Technip SA | | | 568 | | | | 33,834 | |
Tenaris SA | | | 4,173 | | | | 63,058 | |
Transocean Ltd.(d) | | | 1,250 | | | | 22,913 | |
Transocean Ltd. (Zurich)(d) | | | 2,638 | | | | 48,407 | |
WorleyParsons Ltd. | | | 2,661 | | | | 21,797 | |
| | | | | | | | |
| | | | | | | 1,225,340 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–1.8% | | | | | | | | |
Anadarko Petroleum Corp. | | | 1,895 | | | | 156,338 | |
Apache Corp. | | | 1,445 | | | | 90,558 | |
BG Group PLC | | | 20,707 | | | | 277,095 | |
BP PLC | | | 111,844 | | | | 709,938 | |
Cabot Oil & Gas Corp. | | | 1,540 | | | | 45,599 | |
Caltex Australia Ltd. | | | 1,410 | | | | 39,123 | |
Chesapeake Energy Corp. | | | 1,945 | | | | 38,064 | |
Chevron Corp. | | | 7,130 | | | | 799,843 | |
Cimarex Energy Co. | | | 327 | | | | 34,662 | |
ConocoPhillips | | | 4,620 | | | | 319,057 | |
CONSOL Energy, Inc. | | | 840 | | | | 28,400 | |
Delek Group Ltd. | | | 11 | | | | 2,759 | |
Denbury Resources, Inc.(d) | | | 1,310 | | | | 10,650 | |
Devon Energy Corp. | | | 1,420 | | | | 86,918 | |
ENI SpA | | | 15,444 | | | | 270,524 | |
EOG Resources, Inc. | | | 2,060 | | | | 189,664 | |
EQT Corp. | | | 590 | | | | 44,663 | |
Exxon Mobil Corp. | | | 16,037 | | | | 1,482,621 | |
Galp Energia SGPS SA | | | 2,341 | | | | 23,773 | |
Hess Corp. | | | 990 | | | | 73,082 | |
Idemitsu Kosan Co., Ltd. | | | 1,200 | | | | 19,816 | |
Inpex Corp. | | | 5,327 | | | | 59,305 | |
JX Holdings, Inc. | | | 14,000 | | | | 54,482 | |
Kinder Morgan, Inc./DE | | | 6,389 | | | | 270,319 | |
Koninklijke Vopak NV | | | 502 | | | | 26,045 | |
Lundin Petroleum AB(a) | | | 856 | | | | 12,250 | |
Marathon Oil Corp. | | | 2,505 | | | | 70,866 | |
Marathon Petroleum Corp. | | | 1,062 | | | | 95,856 | |
Murphy Oil Corp. | | | 605 | | | | 30,565 | |
Neste Oil Oyj | | | 572 | | | | 13,885 | |
Newfield Exploration Co.(a) | | | 470 | | | | 12,746 | |
Noble Energy, Inc. | | | 1,350 | | | | 64,031 | |
Occidental Petroleum Corp. | | | 2,950 | | | | 237,799 | |
OMV AG | | | 894 | | | | 23,739 | |
ONEOK, Inc. | | | 770 | | | | 38,338 | |
19
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Origin Energy Ltd. | | | 4,903 | | | $ | 46,389 | |
Phillips 66 | | | 2,110 | | | | 151,287 | |
Pioneer Natural Resources Co. | | | 565 | | | | 84,100 | |
QEP Resources, Inc. | | | 575 | | | | 11,627 | |
Range Resources Corp. | | | 650 | | | | 34,743 | |
Repsol SA(d) | | | 6,329 | | | | 118,484 | |
Royal Dutch Shell PLC–Class A | | | 23,936 | | | | 798,813 | |
Royal Dutch Shell PLC–Class B | | | 14,816 | | | | 511,909 | |
Santos Ltd. | | | 4,317 | | | | 28,837 | |
Southwestern Energy Co.(a) | | | 1,295 | | | | 35,341 | |
Spectra Energy Corp. | | | 2,485 | | | | 90,206 | |
Statoil ASA | | | 6,775 | | | | 119,286 | |
Tesoro Corp. | | | 475 | | | | 35,316 | |
TonenGeneral Sekiyu KK(d) | | | 2,000 | | | | 17,073 | |
Total SA | | | 12,995 | | | | 665,760 | |
Tullow Oil PLC | | | 4,387 | | | | 28,271 | |
Valero Energy Corp. | | | 1,975 | | | | 97,763 | |
Williams Cos., Inc. (The) | | | 2,505 | | | | 112,575 | |
Woodside Petroleum Ltd. | | | 4,502 | | | | 139,235 | |
| | | | | | | | |
| | | | | | | 8,880,388 | |
| | | | | | | | |
| | | | | | | 10,105,728 | |
| | | | | | | | |
MATERIALS–1.6% | | | | | | | | |
CHEMICALS–0.9% | | | | | | | | |
Air Liquide SA | | | 2,092 | | | | 258,863 | |
Air Products & Chemicals, Inc. | | | 720 | | | | 103,846 | |
Air Water, Inc. | | | 1,000 | | | | 15,839 | |
Airgas, Inc. | | | 240 | | | | 27,643 | |
Akzo Nobel NV | | | 704 | | | | 48,710 | |
Arkema SA | | | 450 | | | | 29,762 | |
Asahi Kasei Corp. | | | 8,000 | | | | 72,979 | |
BASF SE | | | 5,576 | | | | 467,720 | |
CF Industries Holdings, Inc. | | | 190 | | | | 51,783 | |
Croda International PLC | | | 1,144 | | | | 47,218 | |
Daicel Corp. | | | 3,000 | | | | 35,041 | |
Dow Chemical Co. (The) | | | 4,225 | | | | 192,702 | |
Eastman Chemical Co. | | | 580 | | | | 43,999 | |
Ecolab, Inc. | | | 1,040 | | | | 108,701 | |
EI du Pont de Nemours & Co. | | | 3,445 | | | | 254,723 | |
EMS-Chemie Holding AG (REG) | | | 109 | | | | 44,126 | |
FMC Corp. | | | 480 | | | | 27,374 | |
Givaudan SA(a) | | | 56 | | | | 100,456 | |
Hitachi Chemical Co., Ltd.(d) | | | 900 | | | | 15,900 | |
Incitec Pivot Ltd. | | | 7,611 | | | | 19,688 | |
International Flavors & Fragrances, Inc. | | | 300 | | | | 30,408 | |
Israel Chemicals Ltd. | | | 4,414 | | | | 31,760 | |
Israel Corp., Ltd. (The)(a) | | | 16 | | | | 7,573 | |
Johnson Matthey PLC | | | 1,244 | | | | 65,448 | |
JSR Corp. | | | 800 | | | | 13,731 | |
K&S AG | | | 1,472 | | | | 40,620 | |
Kansai Paint Co., Ltd. | | | 1,000 | | | | 15,492 | |
Kuraray Co., Ltd. | | | 3,000 | | | | 34,085 | |
Lanxess AG | | | 1,319 | | | | 61,086 | |
Linde AG | | | 1,128 | | | | 207,780 | |
LyondellBasell Industries NV–Class A | | | 1,599 | | | | 126,945 | |
| | | | | | | | |
Mitsubishi Chemical Holdings Corp. | | | 6,000 | | | $ | 29,103 | |
Mitsubishi Gas Chemical Co., Inc. | | | 5,000 | | | | 25,094 | |
Mitsui Chemicals, Inc. | | | 8,000 | | | | 22,659 | |
Monsanto Co. | | | 1,990 | | | | 237,745 | |
Mosaic Co. (The) | | | 1,180 | | | | 53,867 | |
Nippon Paint Holdings Co., Ltd. | | | 1,000 | | | | 28,978 | |
Nitto Denko Corp. | | | 900 | | | | 50,288 | |
Novozymes A/S–Class B | | | 1,531 | | | | 64,445 | |
Orica Ltd. | | | 2,259 | | | | 34,616 | |
PPG Industries, Inc. | | | 550 | | | | 127,133 | |
Praxair, Inc. | | | 1,090 | | | | 141,220 | |
Sherwin-Williams Co. (The) | | | 315 | | | | 82,858 | |
Shin-Etsu Chemical Co., Ltd. | | | 2,500 | | | | 162,749 | |
Sigma-Aldrich Corp. | | | 455 | | | | 62,458 | |
Sika AG | | | 6 | | | | 17,700 | |
Solvay SA | | | 360 | | | | 48,713 | |
Sumitomo Chemical Co., Ltd. | | | 7,000 | | | | 27,557 | |
Symrise AG | | | 547 | | | | 32,954 | |
Syngenta AG | | | 564 | | | | 181,415 | |
Taiyo Nippon Sanso Corp.(d) | | | 2,000 | | | | 22,017 | |
Teijin Ltd. | | | 5,000 | | | | 13,290 | |
Toray Industries, Inc. | | | 9,000 | | | | 71,910 | |
Umicore SA | | | 509 | | | | 20,482 | |
Yara International ASA | | | 1,297 | | | | 57,759 | |
| | | | | | | | |
| | | | | | | 4,219,011 | |
| | | | | | | | |
CONSTRUCTION MATERIALS–0.1% | | | | | | | | |
CRH PLC | | | 4,489 | | | | 107,940 | |
Fletcher Building Ltd. | | | 4,446 | | | | 28,645 | |
HeidelbergCement AG | | | 856 | | | | 60,416 | |
Holcim Ltd.(a) | | | 1,390 | | | | 99,363 | |
Imerys SA | | | 448 | | | | 32,960 | |
James Hardie Industries PLC | | | 3,449 | | | | 36,819 | |
Lafarge SA | | | 832 | | | | 58,406 | |
Martin Marietta Materials, Inc. | | | 227 | | | | 25,043 | |
Taiheiyo Cement Corp. | | | 5,000 | | | | 15,687 | |
Vulcan Materials Co. | | | 465 | | | | 30,564 | |
| | | | | | | | |
| | | | | | | 495,843 | |
| | | | | | | | |
CONTAINERS & PACKAGING–0.1% | | | | | | | | |
Amcor Ltd./Australia | | | 7,326 | | | | 80,603 | |
Avery Dennison Corp. | | | 335 | | | | 17,380 | |
Ball Corp. | | | 510 | | | | 34,767 | |
MeadWestvaco Corp. | | | 620 | | | | 27,522 | |
Owens-Illinois, Inc.(a) | | | 560 | | | | 15,114 | |
Rexam PLC | | | 3,136 | | | | 22,077 | |
Sealed Air Corp. | | | 790 | | | | 33,520 | |
Toyo Seikan Group Holdings Ltd. | | | 1,700 | | | | 21,117 | |
| | | | | | | | |
| | | | | | | 252,100 | |
| | | | | | | | |
METALS & MINING–0.5% | | | | | | | | |
Alcoa, Inc. | | | 4,370 | | | | 69,002 | |
Allegheny Technologies, Inc. | | | 385 | | | | 13,386 | |
Anglo American PLC | | | 8,479 | | | | 156,899 | |
Antofagasta PLC | | | 1,773 | | | | 20,659 | |
ArcelorMittal (Euronext Amsterdam) | | | 6,075 | | | | 66,557 | |
20
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
BHP Billiton Ltd. | | | 19,498 | | | $ | 460,984 | |
BHP Billiton PLC | | | 12,822 | | | | 274,793 | |
Boliden AB | | | 1,652 | | | | 26,407 | |
Fortescue Metals Group Ltd.(d) | | | 18,067 | | | | 39,669 | |
Freeport-McMoRan, Inc. | | | 3,875 | | | | 90,520 | |
Fresnillo PLC | | | 1,459 | | | | 17,340 | |
Glencore PLC(a) | | | 64,454 | | | | 297,508 | |
Hitachi Metals Ltd. | | | 1,000 | | | | 16,991 | |
Iluka Resources Ltd. | | | 2,008 | | | | 9,643 | |
JFE Holdings, Inc. | | | 3,000 | | | | 66,903 | |
Kobe Steel Ltd. | | | 12,000 | | | | 20,670 | |
Mitsubishi Materials Corp.(d) | | | 7,000 | | | | 23,222 | |
Newcrest Mining Ltd.(a) | | | 7,017 | | | | 61,742 | |
Newmont Mining Corp. | | | 1,795 | | | | 33,925 | |
Nippon Steel & Sumitomo Metal Corp. | | | 46,000 | | | | 114,109 | |
Norsk Hydro ASA | | | 6,514 | | | | 36,694 | |
Nucor Corp. | | | 1,210 | | | | 59,350 | |
Randgold Resources Ltd. | | | 576 | | | | 39,105 | |
Rio Tinto Ltd. | | | 2,645 | | | | 124,000 | |
Rio Tinto PLC | | | 7,725 | | | | 356,100 | |
Sumitomo Metal Mining Co., Ltd. | | | 3,000 | | | | 44,745 | |
ThyssenKrupp AG(a) | | | 2,036 | | | | 51,865 | |
Voestalpine AG | | | 713 | | | | 28,173 | |
| | | | | | | | |
| | | | | | | 2,620,961 | |
| | | | | | | | |
PAPER & FOREST PRODUCTS–0.0% | | | | | | | | |
International Paper Co. | | | 1,565 | | | | 83,853 | |
Oji Holdings Corp. | | | 4,000 | | | | 14,311 | |
Stora Enso Oyj–Class R | | | 3,342 | | | | 29,881 | |
UPM-Kymmene Oyj | | | 3,231 | | | | 52,950 | |
| | | | | | | | |
| | | | | | | 180,995 | |
| | | | | | | | |
| | | | | | | 7,768,910 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–1.1% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–0.8% | | | | | | | | |
AT&T, Inc. | | | 19,448 | | | | 653,258 | |
Belgacom SA | | | 795 | | | | 28,845 | |
Bezeq The Israeli Telecommunication Corp., Ltd. | | | 7,158 | | | | 12,697 | |
BT Group PLC | | | 49,418 | | | | 307,383 | |
CenturyLink, Inc. | | | 2,110 | | | | 83,514 | |
Deutsche Telekom AG | | | 19,275 | | | | 308,406 | |
Elisa Oyj | | | 635 | | | | 17,332 | |
Frontier Communications Corp.(d) | | | 3,660 | | | | 24,412 | |
HKT Trust & HKT Ltd. | | | 18,882 | | | | 24,544 | |
Iliad SA | | | 163 | | | | 39,191 | |
Inmarsat PLC | | | 2,586 | | | | 32,065 | |
Koninklijke KPN NV | | | 28,755 | | | | 90,790 | |
Level 3 Communications, Inc.(a) | | | 1,047 | | | | 51,701 | |
Nippon Telegraph & Telephone Corp. | | | 2,300 | | | | 117,490 | |
| | | | | | | | |
Orange SA | | | 11,257 | | | $ | 191,444 | |
Singapore Telecommunications Ltd. | | | 48,000 | | | | 140,793 | |
Spark New Zealand Ltd. | | | 9,734 | | | | 23,597 | |
Swisscom AG | | | 154 | | | | 80,810 | |
TDC A/S | | | 3,390 | | | | 25,855 | |
Telecom Italia SpA (ordinary shares)(a) | | | 64,157 | | | | 68,423 | |
Telecom Italia SpA (savings shares) | | | 16,898 | | | | 14,128 | |
Telefonica Deutschland Holding AG(a) | | | 3,756 | | | | 19,906 | |
Telefonica SA | | | 25,577 | | | | 367,222 | |
Telenor ASA | | | 3,853 | | | | 77,941 | |
TeliaSonera AB | | | 10,613 | | | | 68,235 | |
Telstra Corp., Ltd. | | | 26,440 | | | | 128,362 | |
Verizon Communications, Inc. | | | 15,545 | | | | 727,195 | |
Vivendi SA(a) | | | 7,368 | | | | 183,393 | |
Windstream Holdings, Inc.(d) | | | 2,175 | | | | 17,922 | |
| | | | | | | | |
| | | | | | | 3,926,854 | |
| | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–0.3% | | | | | | | | |
KDDI Corp. | | | 3,540 | | | | 222,397 | |
Millicom International Cellular SA | | | 641 | | | | 47,495 | |
NTT DoCoMo, Inc. | | | 9,275 | | | | 135,072 | |
SoftBank Corp. | | | 5,800 | | | | 345,235 | |
StarHub Ltd. | | | 4,000 | | | | 12,498 | |
Tele2 AB–Class B | | | 3,826 | | | | 46,362 | |
Vodafone Group PLC | | | 160,882 | | | | 551,604 | |
| | | | | | | | |
| | | | | | | 1,360,663 | |
| | | | | | | | |
| | | | | | | 5,287,517 | |
| | | | | | | | |
UTILITIES–1.1% | | | | | | | | |
ELECTRIC UTILITIES–0.5% | | | | | | | | |
American Electric Power Co., Inc. | | | 1,825 | | | | 110,814 | |
AusNet Services | | | 37,398 | | | | 40,404 | |
Cheung Kong Infrastructure Holdings Ltd. | | | 7,000 | | | | 51,611 | |
Chubu Electric Power Co., Inc.(a) | | | 2,900 | | | | 34,078 | |
Chugoku Electric Power Co., Inc. (The) | | | 1,300 | | | | 16,997 | |
CLP Holdings Ltd. | | | 12,500 | | | | 108,484 | |
Contact Energy Ltd. | | | 2,149 | | | | 10,672 | |
Duke Energy Corp. | | | 2,632 | | | | 219,877 | |
Edison International | | | 1,215 | | | | 79,558 | |
EDP–Energias de Portugal SA | | | 14,060 | | | | 54,520 | |
Electricite de France SA | | | 1,042 | | | | 28,684 | |
Enel SpA | | | 39,961 | | | | 178,127 | |
Entergy Corp. | | | 675 | | | | 59,049 | |
Exelon Corp. | | | 3,197 | | | | 118,545 | |
FirstEnergy Corp. | | | 1,535 | | | | 59,850 | |
Fortum Oyj | | | 2,697 | | | | 58,556 | |
Hokuriku Electric Power Co. | | | 1,600 | | | | 20,433 | |
21
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Iberdrola SA | | | 31,314 | | | $ | 211,080 | |
Kansai Electric Power Co., Inc. (The)(a) | | | 3,100 | | | | 29,491 | |
Kyushu Electric Power Co., Inc.(a)(d) | | | 1,900 | | | | 19,029 | |
Mighty River Power Ltd. | | | 4,915 | | | | 11,399 | |
NextEra Energy, Inc. | | | 1,645 | | | | 174,847 | |
Northeast Utilities | | | 1,160 | | | | 62,083 | |
Pepco Holdings, Inc. | | | 890 | | | | 23,968 | |
Pinnacle West Capital Corp. | | | 385 | | | | 26,299 | |
Power Assets Holdings Ltd. | | | 8,500 | | | | 82,123 | |
PPL Corp. | | | 2,445 | | | | 88,827 | |
Red Electrica Corp. SA(d) | | | 657 | | | | 57,915 | |
Shikoku Electric Power Co., Inc.(a) | | | 2,700 | | | | 32,750 | |
Southern Co. (The) | | | 3,360 | | | | 165,010 | |
SSE PLC | | | 5,919 | | | | 149,556 | |
Tohoku Electric Power Co., Inc. | | | 2,700 | | | | 31,418 | |
Tokyo Electric Power Co., Inc.(a) | | | 8,800 | | | | 35,792 | |
Xcel Energy, Inc. | | | 1,870 | | | | 67,170 | |
| | | | | | | | |
| | | | | | | 2,519,016 | |
| | | | | | | | |
GAS UTILITIES–0.1% | | | | | | | | |
AGL Resources, Inc. | | | 448 | | | | 24,421 | |
APA Group | | | 3,771 | | | | 22,797 | |
Enagas SA | | | 1,276 | | | | 40,246 | |
Gas Natural SDG SA | | | 2,126 | | | | 53,406 | |
Hong Kong & China Gas Co., Ltd. | | | 32,340 | | | | 73,516 | |
Osaka Gas Co., Ltd. | | | 11,000 | | | | 41,084 | |
Snam SpA | | | 14,719 | | | | 72,848 | |
Toho Gas Co., Ltd. | | | 6,000 | | | | 29,354 | |
Tokyo Gas Co., Ltd. | | | 14,000 | | | | 75,539 | |
| | | | | | | | |
| | | | | | | 433,211 | |
| | | | | | | | |
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS–0.1% | | | | | | | | |
AES Corp./VA | | | 2,385 | | | | 32,841 | |
Electric Power Development Co., Ltd. | | | 500 | | | | 16,896 | |
Enel Green Power SpA | | | 25,579 | | | | 53,592 | |
Meridian Energy Ltd. | | | 6,766 | | | | 9,243 | |
NRG Energy, Inc. | | | 1,240 | | | | 33,418 | |
| | | | | | | | |
| | | | | | | 145,990 | |
| | | | | | | | |
MULTI-UTILITIES–0.4% | | | | | | | | |
AGL Energy Ltd. | | | 3,037 | | | | 33,125 | |
Ameren Corp. | | | 910 | | | | 41,978 | |
CenterPoint Energy, Inc. | | | 1,545 | | | | 36,199 | |
Centrica PLC | | | 30,469 | | | | 131,974 | |
CMS Energy Corp. | | | 970 | | | | 33,708 | |
Consolidated Edison, Inc. | | | 1,080 | | | | 71,291 | |
Dominion Resources, Inc./VA | | | 2,185 | | | | 168,026 | |
DTE Energy Co. | | | 670 | | | | 57,868 | |
E.ON SE | | | 12,148 | | | | 207,630 | |
GDF Suez | | | 8,789 | | | | 204,951 | |
Integrys Energy Group, Inc. | | | 300 | | | | 23,355 | |
National Grid PLC | | | 22,895 | | | | 324,864 | |
| | | | | | | | |
NiSource, Inc. | | | 1,155 | | | $ | 48,995 | |
PG&E Corp. | | | 1,775 | | | | 94,501 | |
Public Service Enterprise Group, Inc. | | | 1,855 | | | | 76,816 | |
RWE AG | | | 3,008 | | | | 92,841 | |
SCANA Corp. | | | 545 | | | | 32,918 | |
Sempra Energy | | | 860 | | | | 95,770 | |
Suez Environnement Co. | | | 2,665 | | | | 46,433 | |
TECO Energy, Inc. | | | 875 | | | | 17,929 | |
United Utilities Group PLC | | | 4,140 | | | | 58,804 | |
Veolia Environnement SA | | | 1,552 | | | | 27,490 | |
Wisconsin Energy Corp.(d) | | | 850 | | | | 44,829 | |
| | | | | | | | |
| | | | | | | 1,972,295 | |
| | | | | | | | |
WATER UTILITIES–0.0% | | | | | | | | |
Severn Trent PLC | | | 1,575 | | | | 49,123 | |
| | | | | | | | |
| | | | | | | 5,119,635 | |
| | | | | | | | |
Total Common Stocks (cost $117,601,957) | | | | | | | 143,412,581 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
GOVERNMENTS– TREASURIES–19.7% | | | | | | | | |
UNITED STATES–19.7% | | | | | | | | |
U.S. Treasury Bonds | | | | | | | | |
2.75%, 8/15/42 | | $ | 920 | | | | 919,713 | |
2.875%, 5/15/43 | | | 350 | | | | 357,984 | |
3.125%, 11/15/41–2/15/43 | | | 2,825 | | | | 3,038,822 | |
3.50%, 2/15/39 | | | 358 | | | | 411,169 | |
3.625%, 8/15/43 | | | 2,015 | | | | 2,369,672 | |
3.75%, 8/15/41 | | | 220 | | | | 265,151 | |
3.875%, 8/15/40 | | | 280 | | | | 341,819 | |
4.25%, 5/15/39 | | | 240 | | | | 308,494 | |
4.375%, 11/15/39–5/15/41 | | | 1,258 | | | | 1,653,500 | |
4.50%, 8/15/39 | | | 220 | | | | 293,184 | |
4.75%, 2/15/37–2/15/41 | | | 401 | | | | 558,371 | |
5.375%, 2/15/31 | | | 650 | | | | 905,988 | |
6.00%, 2/15/26 | | | 762 | | | | 1,044,357 | |
6.25%, 8/15/23–5/15/30 | | | 724 | | | | 1,061,541 | |
6.875%, 8/15/25 | | | 325 | | | | 469,600 | |
7.25%, 5/15/16–8/15/22 | | | 4,093 | | | | 4,690,143 | |
7.50%, 11/15/16 | | | 92 | | | | 103,701 | |
7.625%, 2/15/25 | | | 55 | | | | 82,388 | |
8.00%, 11/15/21 | | | 123 | | | | 171,124 | |
U.S. Treasury Notes | | | | | | | | |
0.375%, 1/31/16 | | | 882 | | | | 882,414 | |
0.50%, 7/31/17 | | | 3,520 | | | | 3,480,125 | |
0.75%, 2/28/18–3/31/18 | | | 5,625 | | | | 5,542,856 | |
0.875%, 11/30/16–4/30/17 | | | 2,315 | | | | 2,321,516 | |
1.00%, 9/30/16–9/30/19 | | | 9,170 | | | | 9,152,241 | |
1.25%, 11/30/18–4/30/19 | | | 5,994 | | | | 5,930,271 | |
1.375%, 11/30/15–2/28/19 | | | 10,437 | | | | 10,471,561 | |
1.50%, 5/31/19–11/30/19 | | | 3,225 | | | | 3,209,005 | |
1.625%, 8/15/22–11/15/22 | | | 2,090 | | | | 2,029,848 | |
1.75%, 5/15/23 | | | 1,740 | | | | 1,694,189 | |
1.875%, 10/31/17 | | | 1,100 | | | | 1,125,868 | |
22
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | |
2.00%, 4/30/16–2/15/23 | | $ | 3,760 | | | $ | 3,772,256 | |
2.125%, 12/31/15–8/15/21 | | | 825 | | | | 837,391 | |
2.25%, 11/30/17 | | | 584 | | | | 603,938 | |
2.375%, 7/31/17–8/15/24 | | | 1,271 | | | | 1,301,633 | |
2.50%, 8/15/23–5/15/24 | | | 2,242 | | | | 2,312,343 | |
2.625%, 1/31/18–11/15/20 | | | 3,140 | | | | 3,278,828 | |
2.75%, 5/31/17–11/15/23 | | | 3,225 | | | | 3,382,771 | |
3.00%, 2/28/17 | | | 889 | | | | 931,644 | |
3.125%, 10/31/16–5/15/21 | | | 1,111 | | | | 1,173,405 | |
3.25%, 7/31/16 | | | 1,147 | | | | 1,196,196 | |
3.375%, 11/15/19 | | | 1,890 | | | | 2,047,549 | |
3.625%, 2/15/20–2/15/21 | | | 2,129 | | | | 2,335,770 | |
3.75%, 11/15/18 | | | 6,205 | | | | 6,760,056 | |
| | | | | | | | |
Total Governments–Treasuries (cost $93,858,104) | | | | | | | 94,820,395 | |
| | | | | | | | |
| | Shares | | | | |
INVESTMENT COMPANIES–18.9% | | | | | | | | |
FUNDS AND INVESTMENT TRUSTS–18.9% | | | | | | | | |
iShares Core MSCI Emerging Markets ETF | | | 499,814 | | | | 23,506,252 | |
iShares International Developed Real Estate ETF | | | 160,190 | | | | 4,812,108 | |
iShares MSCI All Country Asia ex Japan ETF(d) | | | 98,370 | | | | 5,993,684 | |
iShares MSCI EAFE ETF | | | 43,003 | | | | 2,616,303 | |
SPDR S&P 500 ETF Trust | | | 191,843 | | | | 39,423,736 | |
Vanguard REIT ETF | | | 122,091 | | | | 9,889,371 | |
Vanguard Small-Cap ETF(d) | | | 41,400 | | | | 4,829,724 | |
| | | | | | | | |
Total Investment Companies (cost $88,006,236) | | | | | | | 91,071,178 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
INFLATION-LINKED SECURITIES–5.7% | | | | | | | | |
UNITED STATES–5.7% | | | | | | | | |
U.S. Treasury Inflation Index | | | | | | | | |
0.125%, 4/15/18–4/15/19 | | $ | 10,631 | | | | 10,558,471 | |
0.625%, 7/15/21 | | | 3,490 | | | | 3,534,314 | |
| | | | | | | | |
1.125%, 1/15/21 | | $ | 3,738 | | | $ | 3,883,547 | |
1.25%, 7/15/20 | | | 2,640 | | | | 2,771,119 | |
1.375%, 7/15/18–1/15/20 | | | 3,430 | | | | 3,598,837 | |
1.625%, 1/15/18 | | | 872 | | | | 912,676 | |
1.875%, 7/15/19 | | | 1,286 | | | | 1,379,784 | |
2.125%, 1/15/19 | | | 898 | | | | 964,980 | |
| | | | | | | | |
Total Inflation-Linked Securities (cost $28,075,495) | | | | | | | 27,603,728 | |
| | | | | | | | |
| | Shares | | | | |
SHORT-TERM INVESTMENTS–29.5% | | | | | | | | |
INVESTMENT COMPANIES–29.5% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government STIF Portfolio, 0.09%(f)(g) (cost $142,291,638) | | | 142,291,638 | | | $ | 142,291,638 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–103.6% (cost $469,833,430) | | | | | | | 499,199,520 | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.4% | | | | | | | | |
INVESTMENT COMPANIES–1.4% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(f)(g) (cost $6,893,901) | | | 6,893,901 | | | | 6,893,901 | |
| | | | | | | | |
TOTAL INVESTMENTS–105.0% (cost $476,727,331) | | | | | | | 506,093,421 | |
Other assets less liabilities–(5.0)% | | | | | | | (24,143,348 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 481,950,073 | |
| | | | | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | | Original Value | | | Value at December 31, 2014 | | | Unrealized Appreciation/ (Depreciation) | |
Purchased Contracts | | | | | | | | | | | | | | | | | | | | |
10 Yr Australian Bond Futures | | | 99 | | | | March 2015 | | | $ | 10,250,758 | | | $ | 10,357,139 | | | $ | 106,381 | |
10 Yr Canadian Bond Futures | | | 35 | | | | March 2015 | | | | 4,140,304 | | | | 4,173,007 | | | | 32,703 | |
Euro STOXX 50 Index Futures | | | 354 | | | | March 2015 | | | | 12,819,347 | | | | 13,420,449 | | | | 601,102 | |
23
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | | Original Value | | | Value at December 31, 2014 | | | Unrealized Appreciation/ (Depreciation) | |
FTSE 100 Index Futures | | | 74 | | | | March 2015 | | | $ | 7,288,210 | | | $ | 7,522,822 | | | $ | 234,612 | |
Hang Seng Index Futures | | | 3 | | | | January 2015 | | | | 452,798 | | | | 457,448 | | | | 4,650 | |
Long GILT Futures | | | 33 | | | | March 2015 | | | | 6,095,970 | | | | 6,147,886 | | | | 51,916 | |
Mini MSCI EAFE Futures | | | 6 | | | | March 2015 | | | | 532,906 | | | | 527,370 | | | | (5,536 | ) |
S&P 500 EMini Futures | | | 1 | | | | March 2015 | | | | 100,577 | | | | 102,620 | | | | 2,043 | |
SPI 200 Futures | | | 12 | | | | March 2015 | | | | 1,314,729 | | | | 1,318,404 | | | | 3,675 | |
TOPIX Index Futures | | | 113 | | | | March 2015 | | | | 13,469,439 | | | | 13,278,302 | | | | (191,137 | ) |
U.S. T-Note 5 Yr (CBT) Futures | | | 67 | | | | March 2015 | | | | 7,960,231 | | | | 7,968,289 | | | | 8,058 | |
U.S. T-Note 10 Yr (CBT) Futures | | | 68 | | | | March 2015 | | | | 8,580,491 | | | | 8,622,188 | | | | 41,697 | |
U.S. Ultra Bond (CBT) Futures | | | 31 | | | | March 2015 | | | | 4,956,702 | | | | 5,120,813 | | | | 164,111 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 1,054,275 | |
| | | | | | | | | | | | | | | | | | | | |
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | |
Counterparty | | Contract to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
BNP Paribas SA | | AUD | 5,422 | | | USD | 4,557 | | | | 3/18/15 | | | $ | 153,837 | |
BNP Paribas SA | | EUR | 659 | | | USD | 816 | | | | 3/18/15 | | | | 18,229 | |
BNP Paribas SA | | USD | 1,735 | | | AUD | 2,048 | | | | 3/18/15 | | | | (71,437 | ) |
BNP Paribas SA | | USD | 736 | | | GBP | 471 | | | | 3/18/15 | | | | (2,378 | ) |
BNP Paribas SA | | USD | 4,374 | | | JPY | 521,517 | | | | 3/18/15 | | | | (17,691 | ) |
Citibank | | EUR | 6,248 | | | USD | 7,749 | | | | 3/18/15 | | | | 184,071 | |
Citibank | | USD | 2,207 | | | EUR | 1,763 | | | | 3/18/15 | | | | (72,096 | ) |
Credit Suisse International | | USD | 7,036 | | | EUR | 5,749 | | | | 3/18/15 | | | | (74,408 | ) |
Credit Suisse International | | USD | 2,347 | | | GBP | 1,504 | | | | 3/18/15 | | | | (4,707 | ) |
Deutsche Bank AG | | USD | 4,310 | | | GBP | 2,700 | | | | 3/18/15 | | | | (104,329 | ) |
Deutsche Bank AG | | USD | 1,225 | | | SEK | 9,267 | | | | 3/18/15 | | | | (35,931 | ) |
Deutsche Bank AG | | JPY | 256,920 | | | USD | 2,120 | | | | 3/18/15 | | | | (26,479 | ) |
Royal Bank of Scotland PLC | | EUR | 5,170 | | | USD | 6,298 | | | | 3/18/15 | | | | 37,999 | |
Royal Bank of Scotland PLC | | GBP | 929 | | | USD | 1,446 | | | | 3/18/15 | | | | (634 | ) |
Royal Bank of Scotland PLC | | USD | 3,324 | | | JPY | 389,472 | | | | 3/18/15 | | | | (70,378 | ) |
Royal Bank of Scotland PLC | | JPY | 493,305 | | | USD | 4,136 | | | | 3/18/15 | | | | 14,765 | |
Royal Bank of Scotland PLC | | JPY | 66,772 | | | USD | 554 | | | | 3/18/15 | | | | (3,801 | ) |
State Street Bank & Trust Co. | | USD | 7,429 | | | EUR | 5,976 | | | | 3/18/15 | | | | (192,928 | ) |
State Street Bank & Trust Co. | | USD | 677 | | | GBP | 431 | | | | 3/18/15 | | | | (5,697 | ) |
State Street Bank & Trust Co. | | USD | 1,357 | | | JPY | 156,632 | | | | 3/18/15 | | | | (48,657 | ) |
State Street Bank & Trust Co. | | USD | 497 | | | SEK | 3,848 | | | | 3/18/15 | | | | (3,501 | ) |
UBS AG | | CHF | 1,382 | | | USD | 1,399 | | | | 3/18/15 | | | | 7,509 | |
UBS AG | | GBP | 2,701 | | | USD | 4,197 | | | | 3/18/15 | | | | (10,727 | ) |
UBS AG | | GBP | 395 | | | USD | 618 | | | | 3/18/15 | | | | 2,432 | |
UBS AG | | SEK | 5,198 | | | USD | 669 | | | | 3/18/15 | | | | 1,706 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (325,231 | ) |
| | | | | | | | | | | | | | | | |
24
| | |
| | AllianceBernstein Variable Products Series Fund |
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Clearing Broker/(Exchange) & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at December 31, 2014 | | | Notional Amount (000) | | | Market Value | | | Unrealized Appreciation/ (Depreciation) | |
Buy Contracts | | | | | | | | | | | | | | | | | | | | |
Morgan Stanely & Co., LLC/(INTRCONX): | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 22, 5 Year Index, 6/20/19* | | | (5.00 | )% | | | 3.24 | % | | $ | 27,075 | | | | (1,903,116 | ) | | $ | (610,031 | ) |
iTRAXX-Xover, Series 21, 5 Year Index, 6/20/19* | | | (5.00 | ) | | | 2.22 | | | | EUR 6,060 | | | | (857,073 | ) | | | 23,843 | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc./(INTRCONX): | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 22, 5 Year Index, 6/20/19* | | | 5.00 | | | | 3.24 | | | $ | 27,075 | | | | 1,903,116 | | | | 214,919 | |
iTRAXX-Xover, Series 21, 5 Year Index, 6/20/19* | | | 5.00 | | | | 2.22 | | | | EUR 6,060 | | | | 857,073 | | | | 81,878 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | –0 | – | | $ | (289,391 | ) |
| | | | | | | | | | | | | | | | | | | | |
TOTAL RETURN SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | |
Counterparty & Referenced Obligation | | # of Shares or Units | | | Rate Paid/ Received | | Notional Amount (000) | | | Maturity Date | | | Unrealized Appreciation/ (Depreciation) | |
Receive Total Return on Reference Obligation | |
Bank of America, NA | | | | | | | | | | | | | | | | | | |
SPDR S&P 500 ETF Trust | | | 5,487 | | | LIBOR Plus 0.27% | | $ | 1,095 | | | | 6/15/15 | | | $ | 32,683 | |
Deutsche Bank AG London | | | | | | | | | | | | | | | | | | |
FTSE EPRA/NAREIT Developed xUS Net Total Return Index | | | 1,246 | | | LIBOR Plus 0.40% | | | 4,311 | | | | 5/15/15 | | | | 115,041 | |
Goldman Sachs International | | | | | | | | | | | | | | | | | | |
Russell 2000 Total Return Index | | | 441 | | | LIBOR Minus 0.60% | | | 2,473 | | | | 2/26/15 | | | | 34,068 | |
Standard and Poor’s Midcap 400 Index | | | 5,816 | | | LIBOR Plus 0.14% | | | 11,412 | | | | 3/16/15 | | | | 499,809 | |
Russell 2000 Total Return Index | | | 140 | | | LIBOR Minus 0.65% | | | 752 | | | | 3/16/15 | | | | 43,376 | |
UBS AG | | | | | | | | | | | | | | | | | | |
Russell 2000 Total Return Index | | | 487 | | | LIBOR Minus 0.23% | | | 2,617 | | | | 3/16/15 | | | | 150,542 | |
Russell 2000 Total Return Index | | | 30 | | | LIBOR Minus 0.21% | | | 161 | | | | 4/15/15 | | | | 9,272 | |
Russell 2000 Total Return Index | | | 599 | | | LIBOR Minus 0.60% | | | 3,219 | | | | 10/15/15 | | | | 185,628 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | $ | 1,070,419 | |
| | | | | | | | | | | | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Fair valued by the Adviser. |
(d) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(e) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the market value of this security amounted to $19,974 or 0.0% of net assets. |
(f) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
25
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
(g) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
Currency Abbreviation:
AUD—Australian Dollar
CHF—Swiss Franc
EUR—Euro
GBP—Great British Pound
JPY—Japanese Yen
SEK—Swedish Krona
USD—United States Dollar
Glossary:
CBT—Chicago Board of Trade
CDX-NAHY—North American High Yield Credit Default Swap Index
EAFE—Europe, Australia, and Far East
EPRA—European Public Real Estate Association
ETF—Exchange Traded Fund
FTSE—Financial Times Stock Exchange
INTRCONX—Inter-Continental Exchange
LIBOR—London Interbank Offered Rates
MSCI—Morgan Stanley Capital International
NAREIT—National Association of Real Estate Investment Trusts
REG—Registered Shares
REIT—Real Estate Investment Trust
SPDR—Standard & Poor’s Depository Receipt
SPI—Share Price Index
TOPIX—Tokyo Price Index
See notes to financial statements.
26
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $327,541,792) | | $ | 356,907,882 | (a) |
Affiliated issuers (cost $149,185,539—including investment of cash collateral for securities loaned of $6,893,901) | | | 149,185,539 | |
Cash | | | 341,704 | |
Due from broker | | | 4,940,187 | (b) |
Foreign currencies, at value (cost $508,417) | | | 507,461 | |
Receivable for investment securities sold and foreign currency transactions | | | 1,951,155 | |
Interest and dividends receivable | | | 1,059,561 | |
Unrealized appreciation on total return swaps | | | 1,070,419 | |
Unrealized appreciation on forward currency exchange contracts | | | 420,548 | |
Receivable for capital stock sold | | | 168,271 | |
Receivable for variation margin on exchange-traded derivatives | | | 117,400 | |
| | | | |
Total assets | | | 516,670,127 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased and foreign currency transactions | | | 25,859,711 | |
Payable for collateral received on securities loaned | | | 6,893,901 | |
Unrealized depreciation on forward currency exchange contracts | | | 745,779 | |
Collateral received from broker | | | 530,000 | |
Advisory fee payable | | | 281,543 | |
Distribution fee payable | | | 101,426 | |
Payable for capital stock redeemed | | | 91,571 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 203,701 | |
| | | | |
Total liabilities | | | 34,720,054 | |
| | | | |
NET ASSETS | | $ | 481,950,073 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 41,270 | |
Additional paid-in capital | | | 440,629,141 | |
Undistributed net investment income | | | 2,812,919 | |
Accumulated net realized gain on investment and foreign currency transactions | | | 7,592,235 | |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 30,874,508 | |
| | | | |
| | $ | 481,950,073 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 349,628 | | | | 29,771 | | | $ | 11.74 | |
B | | $ | 481,600,445 | | | | 41,240,310 | | | $ | 11.68 | |
(a) | | Includes securities on loan with a value of $6,670,534 (see Note E). |
(b) | | Represents amounts on deposit at the broker as collateral for open derivative contracts. |
See notes to financial statements.
27
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
STATEMENTOF OPERATIONS |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $154,555) | | $ | 5,266,031 | |
Affiliated issuers | | | 113,168 | |
Interest | | | 1,183,638 | |
Securities lending income | | | 83,876 | |
| | | | |
| | | 6,646,713 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 3,033,530 | |
Distribution fee—Class B | | | 1,082,584 | |
Transfer agency—Class A | | | 4 | |
Transfer agency—Class B | | | 5,395 | |
Custodian | | | 266,286 | |
Audit and tax | | | 101,479 | |
Printing | | | 56,709 | |
Administrative | | | 48,567 | |
Legal | | | 41,549 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 132,556 | |
| | | | |
Total expenses | | | 4,773,162 | |
Less: expenses waived and reimbursed by the Adviser (see Note B) | | | (5,544 | ) |
| | | | |
Net expenses | | | 4,767,618 | |
| | | | |
Net investment income | | | 1,879,095 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 195,520 | |
Futures | | | 7,840,792 | |
Options written | | | 458,340 | |
Swaps | | | 3,715,001 | |
Foreign currency transactions | | | (1,164,617 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | 6,602,244 | |
Futures | | | (1,141,009 | ) |
Swaps | | | 348,257 | |
Foreign currency denominated assets and liabilities | | | (480,955 | ) |
| | | | |
Net gain on investment and foreign currency transactions | | | 16,373,573 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 18,252,668 | |
| | | | |
See notes to financial statements.
28
| | |
|
DYNAMIC ASSET ALLOCATION PORTFOLIO |
STATEMENT OF CHANGES IN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 1,879,095 | | | $ | 160,080 | |
Net realized gain on investment and foreign currency transactions | | | 11,045,036 | | | | 16,052,363 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 5,328,537 | | | | 17,264,985 | |
| | | | | | | | |
Net increase in net assets from operations | | | 18,252,668 | | | | 33,477,428 | |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (1,822 | ) | | | (813 | ) |
Class B | | | (1,663,749 | ) | | | (815,668 | ) |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (12,606 | ) | | | (794 | ) |
Class B | | | (16,600,682 | ) | | | (1,125,059 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase | | | 94,188,367 | | | | 135,563,246 | |
| | | | | | | | |
Total increase | | | 94,162,176 | | | | 167,098,340 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 387,787,897 | | | | 220,689,557 | |
| | | | | | | | |
End of period (including undistributed net investment income of $2,812,919 and $737,363, respectively) | | $ | 481,950,073 | | | $ | 387,787,897 | |
| | | | | | | | |
See notes to financial statements.
29
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Dynamic Asset Allocation Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is to maximize total return consistent with the Adviser’s determination of reasonable risk. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
30
| | |
| | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stock: | | | | | | | | | | | | | | | | |
Financials | | $ | 11,917,475 | | | $ | 18,700,694 | | | $ | –0 | –^ | | $ | 30,618,169 | |
Health Care | | | 9,836,847 | | | | 8,255,578 | | | | –0 | – | | | 18,092,425 | |
Consumer Discretionary | | | 8,720,869 | | | | 8,927,664 | | | | –0 | – | | | 17,648,533 | |
Information Technology | | | 13,516,126 | | | | 3,568,747 | | | | –0 | – | | | 17,084,873 | |
Industrials | | | 7,334,002 | | | | 9,324,601 | | | | –0 | – | | | 16,658,603 | |
31
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Consumer Staples | | $ | 6,722,052 | | | $ | 8,306,136 | | | $ | –0 | – | | $ | 15,028,188 | |
Energy | | | 5,820,024 | | | | 4,285,704 | | | | –0 | – | | | 10,105,728 | |
Materials | | | 2,207,351 | | | | 5,561,559 | | | | –0 | – | | | 7,768,910 | |
Telecommunication Services | | | 1,621,737 | | | | 3,665,780 | | | | –0 | – | | | 5,287,517 | |
Utilities | | | 2,223,885 | | | | 2,895,750 | | | | –0 | – | | | 5,119,635 | |
Governments—Treasuries | | | –0 | – | | | 94,820,395 | | | | –0 | – | | | 94,820,395 | |
Investment Companies | | | 91,071,178 | | | | –0 | – | | | –0 | – | | | 91,071,178 | |
Inflation-Linked Securities | | | –0 | – | | | 27,603,728 | | | | –0 | – | | | 27,603,728 | |
Short-Term Investments | | | 142,291,638 | | | | –0 | – | | | –0 | – | | | 142,291,638 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 6,893,901 | | | | –0 | – | | | –0 | – | | | 6,893,901 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 310,177,085 | | | | 195,916,336 | | | | –0 | – | | | 506,093,421 | |
Other Financial Instruments*: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Futures | | | 406,909 | | | | 844,039 | | | | –0 | – | | | 1,250,948 | # |
Forward Currency Exchange Contracts | | | –0 | – | | | 420,548 | | | | –0 | – | | | 420,548 | |
Centrally Cleared Credit Default Swaps | | | –0 | – | | | 320,640 | | | | –0 | – | | | 320,640 | # |
Total Return Swaps | | | –0 | – | | | 1,070,419 | | | | –0 | – | | | 1,070,419 | |
Liabilities: | | | | | | | | | | | | | | | | |
Futures | | | (5,536 | ) | | | (191,137 | ) | | | –0 | – | | | (196,673 | )# |
Forward Currency Exchange Contracts | | | –0 | – | | | (745,779 | ) | | | –0 | – | | | (745,779 | ) |
Centrally Cleared Credit Default Swaps | | | –0 | – | | | (610,031 | ) | | | –0 | – | | | (610,031 | )# |
| | | | | | | | | | | | | | | | |
Total+ | | $ | 310,578,458 | | | $ | 197,025,035 | | | $ | –0 | – | | $ | 507,603,493 | |
| | | | | | | | | | | | | | | | |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
# | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
+ | | There were de minimis transfers under 1% of net assets between Level 1 and Level 2 during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.
| | | | | | | | |
| | Common Stocks | | | Total | |
Balance as of 12/31/13 | | $ | –0 | – | | $ | –0 | – |
Accrued discounts/(premiums) | | | –0 | – | | | –0 | – |
Realized gain (loss) | | | –0 | – | | | –0 | – |
Change in unrealized appreciation/depreciation | | | (14,304 | ) | | | (14,304 | ) |
Purchases | | | –0 | – | | | –0 | – |
Sales | | | –0 | – | | | –0 | – |
Transfers in to Level 3 | | | 14,304 | | | | 14,304 | |
Transfers out of Level 3 | | | –0 | – | | | –0 | – |
| | | | | | | | |
Balance as of 12/31/14 | | $ | –0 | –^ | | $ | –0 | –+ |
| | | | | | | | |
Net change in unrealized appreciation/depreciation from investments held as of 12/31/14* | | $ | (14,304 | ) | | $ | (14,304 | ) |
| | | | | | | | |
* | | The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation of investments in the accompanying statement of operations. |
+ | | There were de minimis transfers under 1% of net assets during the reporting period. |
32
| | |
| | AllianceBernstein Variable Products Series Fund |
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (all years since inception of the Portfolio’s) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
33
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .70% of the Portfolio’s average daily net assets. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to .85% and 1.10% of daily average net assets for Class A and Class B shares, respectively. This fee waiver and/or reimbursement will remain in effect until May 1, 2015 and then may be extended by the Adviser for additional one-year terms. For the year ended December 31, 2014, such reimbursements/waivers amounted to $5,544. Under the agreement, fees waived and expenses borne by the Adviser were subject to repayment by the Fund until April 1, 2014. No repayment would have been made that would have caused the Portfolio’s total annualized operating expenses to exceed the net fee percentage set forth above or would exceed the amount of offering expenses as recorded by the Portfolio on or before April 1, 2012. No repayments were made under this provision.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,567.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
The Portfolio may invest in the AB Fixed-Income Shares, Inc. – Government STIF Portfolio (“Government STIF Portfolio”), an open-end management investment company managed by the Adviser. The Government STIF Portfolio is offered as a cash management option to mutual funds and other institutional accounts of the Adviser, and is not available for direct purchase by members of the public. The Government STIF Portfolio pays no investment management fees but does bear its own expenses. A summary of the Portfolio’s transactions in shares of the Government STIF Portfolio for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | | | Dividend Income (000) | |
$ | 143,078 | | | $ | 187,425 | | | $ | 188,211 | | | $ | 142,292 | | | $ | 110 | |
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $110,261, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
34
| | |
| | AllianceBernstein Variable Products Series Fund |
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 202,913,673 | | | $ | 121,806,499 | |
U.S. government securities | | | 58,759,921 | | | | 28,255,835 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding futures, foreign currency and swap transactions) are as follows:
| | | | |
Cost | | $ | 477,292,275 | |
| | | | |
Gross unrealized appreciation | | | 35,486,880 | |
Gross unrealized depreciation | | | (6,685,734 | ) |
| | | | |
Net unrealized appreciation | | $ | 28,801,146 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:
The Portfolio may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Portfolio bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Portfolio may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Portfolio enters into futures, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Portfolio to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Portfolio to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
35
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
During the year ended December 31, 2014, the Portfolio held futures for hedging and non-hedging purposes.
| • | | Forward Currency Exchange Contracts |
The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Portfolio. 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.
During the year ended December 31, 2014, the Portfolio held forward currency exchange contracts for hedging and non-hedging purposes.
For hedging and investment purposes, the Portfolio may purchase and write (sell) put and call options on U.S. and foreign securities, including government securities, and foreign currencies that are traded on U.S. and foreign securities exchanges and over-the-counter markets. Among other things, the Portfolio may use options transactions for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions” and may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, for hedging and investment purposes.
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 the 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 written options which expire unexercised are recorded by the Portfolio on the expiration date as realized gains from options 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.
The Portfolio may also invest in options on swap agreements, also called “swaptions”. A swaption is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for paying a market-based “premium”. A receiver swaption gives the owner the right to receive the total return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the total return on a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.
During the year ended December 31, 2014, the Portfolio held purchased options for hedging purposes. During the year ended December 31, 2014, the Portfolio held written options for hedging purposes.
36
| | |
| | AllianceBernstein Variable Products Series Fund |
For the year ended December 31, 2014, the Portfolio had the following transactions in written options:
| | | | | | | | |
| | Number of Contracts | | | Premiums Received | |
Options written outstanding as of 12/13/13 | | | –0 | – | | $ | –0 | – |
Options written | | | 66,154 | | | | 928,681 | |
Options expired | | | –0 | – | | | –0 | – |
Options bought back | | | (66,154 | ) | | | (928,681 | ) |
Options exercised | | | –0 | – | | | –0 | – |
| | | | | | | | |
Options written outstanding as of 12/31/14 | | | –0 | – | | $ | –0 | – |
| | | | | | | | |
The Portfolio may enter into swaps to hedge its exposure to interest rates, credit risk, or currencies. The Portfolio may also enter into swaps for non-hedging purposes as a means of gaining market exposures, including by making direct investments in foreign currencies, as described below under “Currency Transactions” or in order to take a “long” or “short” position with respect to an underlying referenced asset described below under “Total Return Swaps”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Portfolio in accordance with the terms of the respective swaps to provide value and recourse to the Portfolio or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by the posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Portfolio enters into a centrally cleared swap, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for swaps cleared through a central clearinghouse’s exchange is generally less than privately negotiated swaps, since the clearinghouse, which is the issuer or counterparty to each exchange-traded swap, has
37
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Portfolio holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Portfolio may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Portfolio may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
In addition, the Portfolio may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Portfolio with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended December 31, 2014, the Portfolio held interest rate swaps for hedging purposes.
Credit Default Swaps:
The Portfolio may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Portfolio, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Portfolio may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Portfolio receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Portfolio is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Portfolio will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Portfolio for the same reference obligation with the same counterparty. As of December 31, 2014, the Portfolio did not have Buy Contracts outstanding with respect to the same referenced obligation and same counterparty for its Sales Contracts outstanding.
Credit default swaps may involve greater risks than if a Portfolio had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Portfolio is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Portfolio is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Portfolio.
During the year ended December 31, 2014, the Portfolio held credit default swaps for non-hedging purposes.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
38
| | |
| | AllianceBernstein Variable Products Series Fund |
Total Return Swaps:
The Portfolio may enter into total return swaps in order take a “long” or “short” position with respect to an underlying referenced asset. The Portfolio is subject to market price volatility of the underlying referenced asset. A total return swap involves commitments to pay interest in exchange for a market linked return based on a notional amount. To the extent that the total return of the security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Portfolio will receive a payment from or make a payment to the counterparty.
During the year ended December 31, 2014, the Portfolio held total return swaps for hedging and non-hedging purposes.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolio and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
The Portfolio’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
At December 31, 2014, the Portfolio had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Interest rate contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 404,866 | * | | | | | | |
Credit contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 320,640 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 610,031 | * |
Equity contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 846,082 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 196,673 | * |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | | 420,548 | | | Unrealized depreciation on forward currency exchange contracts | | | 745,779 | |
Equity contracts | | Unrealized appreciation on total return swaps | | | 1,070,419 | | | | | | | |
| | | | | | | | | | | | |
Total | | | | $ | 3,062,555 | | | | | $ | 1,552,483 | |
| | | | | | | | | | | | |
* | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
39
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
The effect of derivative instruments on the statement of operations for the year ended December 31, 2014:
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Interest rate contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | $ | 2,345,265 | | | $ | 786,042 | |
Equity contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | | 5,495,527 | | | | (1,927,051 | ) |
Foreign exchange contracts | | Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities | | | (724,751 | ) | | | (477,356 | ) |
Interest rate contracts | | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | | | (171,126 | ) | | | (103,983 | ) |
Equity contracts | | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | | | (1,301,136 | ) | | | | |
Equity contracts | | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | | | 458,340 | | | | | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | 123,487 | | | | 137,657 | |
Credit contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | 1,159,211 | | | | (289,391 | ) |
Equity contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | 2,432,303 | | | | 499,991 | |
| | | | | | | | | | |
Total | | | | $ | 9,817,120 | | | $ | (1,374,091 | ) |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2014:
| | | | |
Futures: | | | | |
Average original value of buy contracts | | $ | 93,513,945 | |
Average original value of sale contracts | | $ | 2,587,443 | |
| | | | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 31,574,148 | |
Average principal amount of sale contracts | | $ | 20,974,362 | |
| | | | |
Purchased Options: | | | | |
Average monthly cost | | $ | 506,010 | (a) |
| | | | |
40
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | |
Centrally Cleared Interest Rate Swaps: | | | | |
Average notional amount | | $ | 6,250,000 | (b) |
| | | | |
Centrally Cleared Credit Default Swaps: | | | | |
Average notional amount of buy contracts | | $ | 26,240,715 | (c) |
Average notional amount of sale contracts | | $ | 31,008,600 | (a) |
| | | | |
Total Return Swaps: | | | | |
Average notional amount | | $ | 30,755,035 | |
(a) | | Positions were open for eight months during the year. |
(b) | | Positions were open for four months during the year. |
(c) | | Positions were open for seven months during the year. |
For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Portfolio as of December 31, 2014:
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Received* | | | Security Collateral Received* | | | Net Amount of Derivatives Assets | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc.** | | $ | 15,096 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 15,096 | |
Morgan Stanley & Co., LLC** | | | 113,161 | | | | (10,857 | ) | | | –0 | – | | | –0 | – | | | 102,304 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 128,257 | | | $ | (10,857 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 117,400 | |
| | | | | | | | | | | | | | | | | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Bank of America, NA | | $ | 32,683 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 32,683 | |
BNP Paribas SA | | | 172,066 | | | | (91,506 | ) | | | –0 | – | | | –0 | – | | | 80,560 | |
Citibank | | | 184,071 | | | | (72,096 | ) | | | –0 | – | | | –0 | – | | | 111,975 | |
Deutsche Bank AG London | | | 115,041 | | | | (115,041 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Goldman Sachs International | | | 577,253 | | | | –0 | – | | | (530,000 | ) | | | –0 | – | | | 47,253 | |
Royal Bank of Scotland PLC | | | 52,764 | | | | (52,764 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
UBS AG | | | 357,089 | | | | (10,727 | ) | | | –0 | – | | | (346,362 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,490,967 | | | $ | (342,134 | ) | | $ | (530,000 | ) | | $ | (346,362 | ) | | $ | 272,471 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Pledged* | | | Security Collateral Pledged* | | | Net Amount of Derivatives Liabilities | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Morgan Stanley & Co., LLC** | | $ | 10,857 | | | $ | (10,857 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 10,857 | | | $ | (10,857 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA | | $ | 91,506 | | | $ | (91,506 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
Citibank | | | 72,096 | | | | (72,096 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Credit Suisse International | | | 79,115 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 79,115 | |
Deutsche Bank AG | | | 166,739 | | | | (115,041 | ) | | | –0 | – | | | –0 | – | | | 51,698 | |
Royal Bank of Scotland PLC | | | 74,813 | | | | (52,764 | ) | | | –0 | – | | | –0 | – | | | 22,049 | |
State Street Bank & Trust Co. | | | 250,783 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 250,783 | |
UBS AG | | | 10,727 | | | | (10,727 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 745,779 | | | $ | (342,134 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 403,645 | ^ |
| | | | | | | | | | | | | | | | | | | | |
* | | The actual collateral received/pledged may be more than the amount reported due to overcollateralization. |
** | | Cash has been posted for initial margin requirements for exchange traded derivatives outstanding at December 31, 2014. |
^ | | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
41
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $6,670,534 and had received cash collateral which has been invested into AB Exchange Reserves of $6,893,901. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $83,876 and $3,340 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 1,054 | | | $ | 178,055 | | | $ | 172,215 | | | $ | 6,894 | |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 25,879 | | | | 21,276 | | | | | $ | 306,156 | | | $ | 239,297 | |
Shares issued in reinvestment of dividends and distributions | | | 1,199 | | | | 138 | | | | | | 13,912 | | | | 1,526 | |
Shares redeemed | | | (20,202 | ) | | | (1,016 | ) | | | | | (241,602 | ) | | | (11,385 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase | | | 6,876 | | | | 20,398 | | | | | $ | 78,466 | | | $ | 229,438 | |
| | | | | | | | | | | | | | | | | | |
42
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 10,708,222 | | | | 15,088,582 | | | | | $ | 125,493,251 | | | $ | 168,096,951 | |
Shares issued in reinvestment of dividends and distributions | | | 1,581,336 | | | | 175,631 | | | | | | 18,264,431 | | | | 1,940,727 | |
Shares redeemed | | | (4,228,715 | ) | | | (3,121,224 | ) | | | | | (49,647,781 | ) | | | (34,703,870 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase | | | 8,060,843 | | | | 12,142,989 | | | | | $ | 94,109,901 | | | $ | 135,333,808 | |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Interest Rate Risk and Credit Risk—Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio’s investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio’s investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as “junk bonds”) have speculative elements or are predominantly speculative risks.
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
ETF Risk—ETFs are investment companies. When the Portfolio invests in an ETF, the Portfolio bears its share of the ETFs expenses and runs the risk that the ETF may not achieve its investment objectives.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
43
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 10,233,755 | | | $ | 1,548,285 | |
Net long-term capital gains | | | 8,045,104 | | | | 394,049 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 18,278,859 | | | $ | 1,942,334 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 8,601,734 | |
Undistributed net capital gain | | | 3,927,483 | |
Accumulated capital and other losses | | | (10,347 | )(a) |
Unrealized appreciation/(depreciation) | | | 28,771,399 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 41,290,269 | (c) |
| | | | |
(a) | | As of December 31, 2014, the Portfolio had cumulative deferred losses on straddles of $10,347. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the tax treatment of swaps, passive foreign investment companies (PFICs) and Treasury inflation-protected securities, return of capital distributions received from underlying securities, the tax treatment of corporate restructurings, and the realization for tax purposes of gains/losses on certain derivative instruments. |
(c) | | The difference between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to the amortization of offering costs. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to foreign currency reclassifications, the tax treatment of swaps, futures, and passive foreign investment companies (PFICs), return of capital distributions received from underlying securities, and the tax treatment of clearing fees resulted in a net increase in undistributed net investment income and a net decrease in accumulated net realized gain on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
44
| | |
|
DYNAMIC ASSET ALLOCATION PORTFOLIO |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | | | April 1, 2011(a) to December 31, 2011 | |
| | 2014 | | | 2013 | | | 2012 | | |
Net asset value, beginning of period | | | $11.74 | | | | $10.53 | | | | $9.75 | | | | $10.00 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | |
Net investment income (loss) (b)(c) | | | .08 | | | | .03 | | | | (.01 | ) | | | .03 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .44 | | | | 1.26 | | | | .81 | | | | (.28 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .52 | | | | 1.29 | | | | .80 | | | | (.25 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.07 | ) | | | (.04 | ) | | | (.01 | ) | | | –0 | – |
Distributions from net realized gain on investment transactions | | | (.45 | ) | | | (.04 | ) | | | (.01 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.52 | ) | | | (.08 | ) | | | (.02 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $11.74 | | | | $11.74 | | | | $10.53 | | | | $9.75 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d) | | | 4.45 | % | | | 12.31 | % | | | 8.22 | % | | | (2.50 | )% |
| | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $350 | | | | $269 | | | | $27 | | | | $9,742 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | .85 | % | | | .85 | % | | | .85 | % | | | .85 | %^ |
Expenses, before waivers/reimbursements | | | .85 | % | | | .89 | % | | | 1.22 | % | | | 2.53 | %^ |
Net investment income (loss) (c) | | | .69 | % | | | .31 | % | | | (.14 | )% | | | .36 | %^ |
Portfolio turnover rate | | | 53 | % | | | 52 | % | | | 51 | % | | | 68 | % |
See footnote summary on page 46.
45
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
FINANCIAL HIGHLIGHTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | | | April 1, 2011(a) to December 31, 2011 | |
| | 2014 | | | 2013 | | | 2012 | | |
Net asset value, beginning of period | | | $11.68 | | | | $10.49 | | | | $9.74 | | | | $10.00 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | |
Net investment income (b)(c) | | | .05 | | | | .01 | | | | .01 | | | | .06 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .45 | | | | 1.25 | | | | .76 | | | | (.32 | ) |
| | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .50 | | | | 1.26 | | | | .77 | | | | (.26 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.05 | ) | | | (.03 | ) | | | (.01 | ) | | | –0 | – |
Distributions from net realized gain on investment transactions | | | (.45 | ) | | | (.04 | ) | | | (.01 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.50 | ) | | | (.07 | ) | | | (.02 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $11.68 | | | | $11.68 | | | | $10.49 | | | | $9.74 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d) | | | 4.21 | % | | | 12.04 | % | | | 7.90 | % | | | (2.60 | )% |
| | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $481,600 | | | | $387,519 | | | | $220,663 | | | | $51,687 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.10 | % | | | 1.10 | % | | | 1.10 | % | | | 1.10 | %^ |
Expenses, before waivers/reimbursements | | | 1.10 | % | | | 1.14 | % | | | 1.29 | % | | | 2.45 | %^ |
Net investment income (c) | | | .43 | % | | | .05 | % | | | .12 | % | | | 1.02 | %^ |
Portfolio turnover rate | | | 53 | % | | | 52 | % | | | 51 | % | | | 68 | % |
(a) | | Commencement of operations. |
(b) | | Based on average shares outstanding. |
(c) | | Net of fees waived and expenses reimbursed by the Adviser. |
(d) | | Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Total return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
See | | notes to financial statements. |
46
| | |
|
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Dynamic Asset Allocation Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Dynamic Asset Allocation Portfolio (one of the funds constituting the AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)), as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and the period April 1, 2011 (commencement of operations) through December 31, 2011. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Dynamic Asset Allocation Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and the period April 1, 2011 (commencement of operations) through December 31, 2011, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
47
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|
| | |
2014 FEDERAL TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 8.51% of dividends paid qualify for the dividends received deduction.
48
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| | |
DYNAMIC ASSET |
ALLOCATION PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
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| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Daniel J. Loewy(2), Vice President Vadim Zlotnikov (2), Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
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| | |
CUSTODIANAND ACCOUNTING AGENT | | LEGAL COUNSEL |
State Street Bank and Trust Company | | Seward & Kissel LLP |
State Street Corporation CCB/5 1 Iron Street | | One Battery Park Plaza New York, NY 10004 |
Boston, MA 02210 | | |
| | |
DISTRIBUTOR | | TRANSFER AGENT |
AllianceBernstein Investments, Inc. | | AllianceBernstein Investor Services, Inc. |
1345 Avenue of the Americas | | P.O. Box 786003 |
New York, NY 10105 | | San Antonio, TX 78278-6003 |
| | Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC | | |
ACCOUNTING FIRM | | |
Ernst & Young LLP | | |
5 Times Square | | |
New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Adviser’s Dynamic Asset Allocation Team. Daniel J. Loewy and Vadim Zlotnikov are the investment professionals primarily responsible for the day-to-day management of the Portfolio’s portfolio. |
49
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| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2006, and interim CEO 1999-2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014 |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001-2008. | | | 116 | | | None |
| | | | | | | | |
50
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
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William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
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51
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
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Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
52
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
53
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DYNAMIC ASSET ALLOCATION PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Daniel J. Loewy 40 | | Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2010. |
| | | | |
Vadim Zlotnikov 52 | | Vice President | | Senior Vice President of the Adviser,** with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel, and Assistant Secretary of ABI,** with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of ABIS,** with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS,** with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABIS and ABI are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
54
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|
DYNAMIC ASSET ALLOCATION PORTFOLIO |
CONTINUANCE DISCLOSURE | | AllianceBernstein Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE PORTFOLIO’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”) unanimously approved the continuance of the Fund’s Advisory Agreement with the Adviser in respect of AllianceBernstein Dynamic Asset Allocation Portfolio (the “Portfolio”) at a meeting held on August 4-7, 2014.
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed an independent evaluation prepared by the Fund’s Senior Officer (who is also the Fund’s Independent Compliance Officer) of the reasonableness of the advisory fee, in which the Senior Officer concluded that the contractual fee for the Portfolio was reasonable. The directors also discussed the proposed continuance in private sessions with counsel and the Fund’s Senior Officer.
The directors considered their knowledge of the nature and quality of the services to be provided by the Adviser to the Portfolio gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. The directors noted that they have four regular meetings each year, at each of which they receive presentations from the Adviser on the investment results of the Portfolio and review extensive materials and information presented by the Adviser.
The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Portfolio and the overall arrangements between the Portfolio and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Portfolio. They noted the professional experience and qualifications of the Portfolio’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Portfolio will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Portfolio by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Portfolio to the Adviser than the fee rate stated in the Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s Senior Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Portfolio’s other service providers, also were considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Portfolio under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Portfolio to the Adviser for the calendar years 2012 and 2013 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s Senior Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Portfolio, including those relating to its subsidiaries which provide transfer agency, distribution and brokerage services to the Portfolio. The directors recognized that it is difficult to make comparisons of profitability of the Advisory Agreement with advisory contracts for
55
| | |
DYNAMIC ASSET ALLOCATION PORTFOLIO |
CONTINUANCE DISCLOSURE | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Portfolio before taxes and distribution expenses. The directors were satisfied that the Adviser’s level of profitability from its relationship with the Portfolio was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Portfolio, including but not limited to benefits relating to soft dollar arrangements (whereby the Adviser receives brokerage and research services from brokers that execute transactions for certain clients, including the Portfolio); 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of the Portfolio’s Class B shares; transfer agency fees paid by the Portfolio to a wholly owned subsidiary of the Adviser; and brokerage commissions paid by the Portfolio to brokers affiliated with the Adviser. The directors recognized that the Portfolio’s profitability to the Adviser would be somewhat lower without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Portfolio.
Investment Results
In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for the Portfolio at each regular Board meeting during the year. At the August 2014 meeting, the directors reviewed information prepared by Lipper showing the performance of the Class A Shares of the Portfolio as compared with that of a group of similar funds selected by Lipper (the “Performance Group”) and as compared with that of a broader array of funds selected by Lipper (the “Performance Universe”), and information prepared by the Adviser showing performance of the Class A Shares as compared with the Morgan Stanley Capital International (MSCI) World Index, the Barclays U.S. Treasury Index and its blended benchmark (a 60%/40% blend of the MSCI World Index and the Barclays U.S. Treasury Index), in each case for the 1- and 3-year periods ended May 31, 2014 and (in the case of comparison with the indices) the since inception period (April 2011 inception). The directors noted that the Portfolio was in the 4th quintile of the Performance Group and 3rd quintile of the Performance Universe for the 1- and 3-year periods. It outperformed the Barclays U.S. Treasury Index (its secondary benchmark) in the 1-year period and the period since inception but lagged the MSCI World Index (its primary benchmark) and its blended benchmark. Based on their review, the directors concluded that the Portfolio’s performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Portfolio to the Adviser and information prepared by Lipper concerning advisory fee rates paid by other funds in the same Lipper category as the Portfolio at a common asset level. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The information reviewed by the directors showed that, at the Portfolio’s current size, its contractual effective advisory fee rate of 70 basis points, plus the 1.8 basis point impact of the administrative expense reimbursement in the latest fiscal year ,was lower than the Expense Group median.
The directors also considered the fees the Adviser charges non-fund clients pursuing a substantially similar investment style. For this purpose, they reviewed the relevant fee information from the Adviser’s Form ADV and the evaluation from the Fund’s Senior Officer. The directors noted that the institutional fee schedule and the Portfolio’s fee schedule started at different rates and that the institutional fee schedule had breakpoints. The application of the institutional fee schedule to the Portfolio’s net assets would result in a fee rate lower than the rate being paid under the Portfolio’s Advisory Agreement. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors also reviewed information that indicated that the Portfolio’s fee rate is higher than the sub-advisory fee rate earned by the Adviser for sub-advising other registered investment companies pursuing a similar investment style.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Portfolio relative to institutional clients and sub-advised funds. The Adviser noted that because mutual funds are constantly issuing and redeeming shares, they are more difficult to manage than an institutional account, where the assets tend to be relatively stable. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds such as the Portfolio, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
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| | AllianceBernstein Variable Products Series Fund |
The directors noted that the Portfolio may invest in shares of exchange-traded funds (“ETFs”), subject to the restrictions and limitations of the Investment Company Act of 1940 as these may be varied as a result of exemptive orders issued by the SEC. The directors also noted that ETFs pay advisory fees pursuant to their advisory contracts. The directors concluded, based on the Adviser’s explanation of how it may use ETFs when they are the most cost effective way to obtain desired exposures for a fund or to temporarily “equitize” cash inflows pending purchases of underlying securities, that the advisory fee for the Portfolio would be paid for services that would be in addition to, rather than duplicative of, the services to be provided under the advisory contracts of the ETFs.
The directors also considered the total expense ratio of the Class A shares of the Portfolio in comparison to the fees and expenses of funds within two comparison groups created by Lipper: an Expense Group and an Expense Universe. Lipper described an Expense Group as a representative sample of funds similar to the Portfolio and an Expense Universe as a broader group, consisting of all funds in the investment classification/objective with a similar load type as the Portfolio. The Class A expense ratio of the Portfolio was based on the Portfolio’s latest fiscal year and reflected fee waivers and/or expense reimbursements as a result of an expense cap by the Adviser. The directors noted that it was likely that the expense ratios of some of the other funds in the Portfolio’s Lipper category also were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view the expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Portfolio by others.
The directors noted that the Portfolio’s total expense ratio, reflecting a cap by the Adviser, was higher than the Expense Group and the Expense Universe medians. After discussing with the Adviser the reasons for the Portfolio’s expense ratio, the directors concluded that the Portfolio’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Portfolio does not contain breakpoints, and that they had previously discussed their strong preference, and that of the Senior Officer, for breakpoints in advisory contracts with the Adviser. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AllianceBernstein Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale at the May 2014 meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to the fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Portfolio, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. The directors informed the Adviser that they would monitor the Portfolio’s assets level and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.
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DYNAMIC ASSET ALLOCATION PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Dynamic Asset Allocation Portfolio (the “Portfolio”).2,3 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by the August 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement.
The Senior Officer’s evaluation considered the following factors:
| 1. | Management fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Management fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the Assurance of Discontinuance between the NYAG and the Adviser. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what Section 36(b) requires: to face liability under Section 36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of Section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.” 4
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement.
| | | | | | |
Portfolio | | Net Assets 06/30/14 ($MM) | | | Advisory Fee |
Dynamic Asset Allocation Portfolio | | $ | 442.2 | | | 0.70% of average daily net assets |
1 | | The information in the fee evaluation was completed on July 24, 2014 and discussed with the Board of Directors on August 5-7, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratios refer to the Class A shares of the Portfolio. |
3 | | The Portfolio commenced operation on April 1, 2011. |
4 | | Jones v. Harris at 1427. |
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The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $54,422 (0.018% of the Portfolio’s average daily net assets) for such services.
The Adviser agreed to waive that portion of its management fees and/or reimburse the Portfolio for that portion of its total operating expenses to the degree necessary to limit the Portfolio’s expense ratios to the amounts set forth below for the Portfolio’s current fiscal year. The agreement for such reimbursement is terminable by the Adviser upon at least 60 days’ notice prior to the Portfolio’s prospectus update. Set forth below are the Portfolio’s gross expense ratios for the most recently completed fiscal year:
| | | | | | |
Portfolio | | Expense Cap Pursuant to Expense Limitation Undertaking | | Gross Expense Ratio (12/31/13) | | Fiscal Year End |
Dynamic Asset Allocation Portfolio | | Class A 0.85% | | 0.89% | | December 31 |
| | Class B 1.10% | | 1.14% | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed by the Portfolio for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.5 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have
5 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
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SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on June 30, 2014 net assets:6
| | | | | | | | | | | | | | |
Portfolio | | Net Assets 6/30/14 ($MM) | | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Dynamic Asset Allocation Portfolio | | $ | 442.2 | | | Dynamic All Market 0.60% on 1st $500 million 0.50% on the balance | | | 0.600 | % | | | 0.700 | % |
| | | | | | Minimum account size: $250 m | | | | | | | | |
The Adviser manages AllianceBernstein Dynamic All Market Fund—(“Dynamic All Market Fund”), a retail mutual fund which has a somewhat similar investment style as the Portfolio. The advisory fee schedule of Dynamic All Market Fund is set forth below.
| | | | |
Portfolio | | AB Fund | | Fee |
Dynamic Asset Allocation Portfolio | | Dynamic All Market Fund | | 0.60% of average daily net assets |
The Adviser manages the Sanford C. Bernstein Fund, Inc. Overlay Portfolios (the “Overlay Portfolios”), which utilize the Adviser’s DAA strategy. Unlike the Dynamic Asset Allocation Portfolio, the Overlay Portfolios are not designed as stand-alone investments and are used in conjunction with globally diversified Private Client portfolios.7 The advisory fee schedules of the Overlay Portfolios are set forth below. Also shown are what would have been the effective advisory fees of the Portfolio had the Overlay Portfolios’ fee schedules been applicable to the Portfolio based on June 30, 2014 net assets:
| | | | |
Portfolio | | Overlay Portfolio | | Fee8 |
Dynamic Asset Allocation Portfolio | | Overlay A Portfolio Tax-Aware Overlay A Portfolio | | 0.90% of average daily net assets |
| | |
| | Overlay B Portfolio Tax-Aware Overlay B Portfolio Tax-Aware Overlay C Portfolio Tax-Aware Overlay N Portfolio | | 0.65% of average daily net assets |
The Adviser also manages and sponsors retail mutual funds, which are organized in jurisdictions outside the United States, generally Luxembourg and Japan, and sold to non-United States resident investors. The Adviser charges the following fees for Dynamic Diversified Portfolio, a Luxembourg fund that has a somewhat similar investment style as the Portfolio:
| | | | |
Portfolio | | Luxembourg Fund | | Fee9 |
Dynamic Asset Allocation Portfolio | | Dynamic Diversified Portfolio | | |
| | Class A | | 1.70% |
| | Class I (Institutional) | | 0.90% |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families that have an investment style similar to that of the Portfolio. The Adviser charges the fees set forth below for the sub-advisory relationship that has a somewhat similar investment style as the Portfolio. Also shown are what would have been the effective advisory fees of the Portfolio had the fee schedules of the sub-advisory relationships been applicable to the Portfolio based on June 30, 2014 net assets.
6 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
7 | | Overlay A Portfolio and Tax-Aware Overlay A Portfolio are intended for use in Private Client accounts that have a higher equity weighting (e.g. 80% equity and 20% fixed-income). The other Overlay Portfolios are intended for use in Private Client accounts that have a higher fixed income weighting (e.g. 70% fixed- income and 30% equity). The Overlay Portfolios will gain exposure to various asset classes through direct investments in equity and debt securities as well as derivatives. |
8 | | The advisory fees of each Overlay Portfolio are based on the percentage of each portfolio’s average daily net assets, not an aggregate of the assets in the portfolios shown. |
9 | | Class A shares of the Luxembourg funds are charged an “all-in” fee, which includes investment advisory and distribution-related services, unlike Class I shares, whose fee is for only investment advisory services. |
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| | | | | | | | |
Portfolio | | | | Fee Schedule | | Effective Sub-Adv. Fee | |
Dynamic Asset Allocation Portfolio | | Client # 1 | | 0.40% on 1st $250 million 0.35% on next $250 million 0.325% on next $500 million 0.30% on the balance | | | 0.378% | |
| | | |
| | Client # 2 | | 0.40% on first $100 million 0.35% on next $100 million 0.30% on the balance | | | 0.334% | |
| | | |
| | Client # 310 | | 0.35% on first $400 million 0.30% on the balance | | | 0.345% | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser. In addition, to the extent that certain of these sub-advisory relationships are with affiliates of the Adviser, the fee schedules may not reflect arm’s length bargaining or negotiations.
While it appears that the sub-advisory relationship is paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such a lower fee due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationship. There could be various business reasons why an investment adviser would be willing to provide a sub-advisory relationship investment related services at a different fee level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management, generally required by a registered investment company.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.11 Lipper’s analysis included the Portfolio’s contractual management fee12 estimated at the approximate current asset level of the Portfolio to the median of the Portfolio’s Lipper Expense Group (“EG”).13
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee14 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Dynamic Asset Allocation Portfolio | | | 0.700 | | | | 0.758 | | | | 3/7 | |
Lipper also compared the Portfolio’s most recently completed fiscal year total expense ratio to the medians of the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.15
10 | | The client is an affiliate of the Adviser. |
11 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of the negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
12 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
13 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratios than comparable sized funds that have relatively large average account sizes. In addition, there are limitations in Lipper’s expense category data because different funds categorize expenses differently. |
14 | | The contractual management fee would not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. In addition, the contractual management fee does not reflect any advisory fee waivers for expense caps that would effectively reduce the actual management fee. |
15 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
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SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Total Expense Ratio (%)16 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Dynamic Asset Allocation Portfolio | | | 0.851 | | | | 0.730 | | | | 5/7 | | | | 0.724 | | | | 9/14 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter and distributor, AllianceBernstein Investments, Inc. (“ABI”), an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $735,941 in Rule 12b-1 fees from the Portfolio.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $1,649,568 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year.
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of approximately $1,385 from the Portfolio.17
The Portfolio did not effect any brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) nor its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB.” The Adviser represented that SCB’s profitability from any future business conducted with the Portfolio would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and
16 | | Most recently completed fiscal year Class A total expense ratio. |
17 | | The Fund (which includes the Portfolio and other series of the Fund) paid ABIS a flat fee of $18,000 in 2013. |
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charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for its clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously, in February 2008, the independent consultant provided the Board of Directors an update of the Deli18 study on advisory fees and various fund characteristics.19 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.20 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $480 billion as of June 30, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1 and 3 year net performance ranking and return21 of the Portfolio relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)22 for the periods ended May 31, 2014.23
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Portfolio Return (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Dynamic Asset Allocation Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 9.61 | | | | 10.57 | | | | 9.98 | | | | 5/7 | | | | 8/14 | |
3 year | | | 6.15 | | | | 7.76 | | | | 6.14 | | | | 4/5 | | | | 4/8 | |
18 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
19 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
20 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
21 | | The performance rankings are for the Class A shares of the Portfolio. The performance return of the Portfolio shown was provided by Lipper. |
22 | | The Portfolio’s PG/PU is identical to the Portfolio’s EG/EU. |
23 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
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(continued) | | AllianceBernstein Variable Products Series Fund |
Set forth below are the 1 year, 3 year and since inception net performance returns of the Portfolio (in bold) versus its benchmark for the periods ended May 31, 2014.24
| | | | | | | | | | | | |
| | Periods Ending May 31, 2014 Annualized Net Performance (%) | |
| | 1 Year (%) | | | 3 Year (%) | | | Since Inception (%) | |
Dynamic Asset Allocation Portfolio | | | 9.61 | | | | 6.15 | | | | 6.52 | |
60% MSCI World/ 40% Barclays US Aggregate Government—Treasury | | | 11.56 | | | | 7.79 | | | | 8.06 | |
MSCI World Net Index | | | 18.87 | | | | 10.56 | | | | 10.50 | |
Barclays US Aggregate Government—Treasury | | | 1.06 | | | | 2.99 | | | | 3.70 | |
Inception Date: April 1, 2011 | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. However, the Senior Officer recommended that the Directors discuss with the Adviser the proposed advisory fee schedule of the Portfolio, which lack potential for sharing economies of scale through breakpoints, should the Portfolio’s assets, which currently remain low, grow to a substantial level. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: August 29, 2014
24 | | The performance returns shown in the table are for the Class A shares of the Portfolio. The performance returns for the Portfolio and the benchmark were provided by the Adviser. |
64
VPS-DAA-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | GLOBAL THEMATIC GROWTH PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
GLOBAL THEMATIC GROWTH | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Global Thematic Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio pursues opportunistic growth by investing in a global universe of companies in multiple industries that may benefit from innovation.
AllianceBernstein L.P. (the “Adviser”) employs a combination of “top-down” and “bottom-up” investment processes with the goal of identifying the most attractive securities worldwide, fitting into broader themes, which are developments that have broad effects across industries and companies. Drawing on the global fundamental and quantitative research capabilities of the Adviser, the Adviser seeks to identify long-term secular growth trends that will affect multiple industries. The Adviser will assess the effects of these trends, in the context of the business cycle, on entire industries and on individual companies. The Adviser normally considers a large universe of mid- to large-capitalization companies worldwide for investment.
The Portfolio invests in securities issued by U.S. and non-U.S. companies from multiple industry sectors in an attempt to maximize opportunity, which should also tend to reduce risk. The Portfolio invests in both developed and emerging-market countries. Under normal market conditions, the Portfolio invests significantly (at least 40%—unless market conditions are not deemed favorable by the Adviser) in securities of non-U.S. companies. In addition, the Portfolio invests, under normal circumstances, in the equity securities of companies located in at least three countries. The percentage of the Portfolio’s assets invested in securities of companies in a particular country or denominated in a particular currency varies in accordance with the Adviser’s assessment of the appreciation potential of such securities.
The Portfolio may invest in any company and industry and in any type of equity security, listed and unlisted, with potential for capital appreciation. It invests in well-known, established companies as well as new, smaller or less-seasoned companies. Investments in new, smaller or less-seasoned companies may offer more reward but may also entail more risk than is generally true of larger, established companies. The Portfolio may also invest in synthetic foreign equity securities, which are various types of warrants used internationally that entitle a holder to buy or sell underlying securities, real estate investment trusts and zero coupon bonds.
The Portfolio may, at times, invest in shares of exchange-traded funds (“ETFs”) in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
Currencies can have a dramatic impact on equity returns, significantly adding to returns in some years and greatly diminishing them in others. Currency and equity positions are evaluated separately. The Adviser may seek to hedge the currency exposure resulting from securities positions when it finds the currency exposure unattractive. To hedge a portion of its currency risk, the Portfolio may from time to time invest in currency-related derivatives, including forward currency exchange contracts, futures, options on futures, swaps and options. The Adviser may also seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives.
The Portfolio may enter into other derivatives transactions, such as options, futures, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of ETFs. These transactions may be used, for example, to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Portfolio’s portfolio from a decline in value, sometimes within certain ranges.
INVESTMENT RESULTS
The table on page 5 shows the Portfolio’s performance compared to its benchmark, the Morgan Stanley Capital International All Country (“MSCI AC”) World Index (net) for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio outperformed the benchmark for the annual period. Sector allocation was responsible for much of the outperformance; currency positioning also contributed. Security selection was negative. Stock selection in health care (mostly embedded within the Portfolio’s Genomic Age, Fortifying Franchises and Emerging Consumer themes) and overweight exposure to the technology sector (mostly embedded within the Portfolio’s Web 3.0 theme) contributed. Stock selection in technology (mostly embedded within the Web 3.0 theme) and energy (mostly embedded within the Energy Transformation theme) detracted.
The Portfolio utilized derivatives in the form of currency forwards for hedging purposes, which detracted from performance during the annual period.
1
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| | AllianceBernstein Variable Products Series Fund |
MARKET REVIEW AND INVESTMENT STRATEGY
The performance of global equity markets was uneven in 2014, as risk sentiment seesawed amid mixed news flow. The global economic outlook dimmed in key regions of the world. In Europe, the eurozone continued to be burdened by sluggish growth and the looming specter of deflation, leading to speculation in the closing months of the year that the European Central Bank would implement a quantitative easing program similar to the one employed by the U.S. In Asia, fears that Japan’s economic recovery was faltering prompted the Bank of Japan to inject more liquidity into global markets by significantly increasing its purchase of Japanese government assets, which lifted world equity markets temporarily. Data would indicate that Japan’s economy, the world’s third largest, had, in fact, slipped into a recession in the third quarter. Additionally, in emerging Asia, data released during the period continued to suggest that China’s economy, the world’s second largest, was weakening. Despite the discouraging numbers, China’s equity markets rose for the year on hopes that the country’s policymakers would soon implement more stimulus measures to jump-start growth. Concerns about the dimming global economic outlook led to a steep drop in commodity prices, especially crude oil, and negatively impacted the economies of countries that rely heavily on exporting raw materials, including Australia, Brazil and Russia. The one bright spot was found in the U.S., where investors grew increasingly confident that the American economy was strengthening, buoyed by a low interest rate environment, encouraging domestic data, strong corporate earnings and news about potential corporate deals.
The Global Thematic Growth Oversight Group (the “Team”) continues to identify companies involved in disruptive themes and offering valuations that, in the Team’s view, do not adequately capture their upside potential. The Team continues to focus on trends that persist regardless of the economic cycle, possessing what its analysis suggests to be longer-term growth fundamentals.
2
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| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged MSCI AC World Index (net) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI AC World Index (net; free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets. Net returns reflect the reinvestment of dividends after deduction of non-U.S. withholding tax. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products This report is not approved, reviewed or produced by MSCI. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as value, may underperform the market generally.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Focused Portfolio Risk: Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Portfolio’s net asset value (“NAV”).
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Leverage Risk: To the extent the Portfolio uses leveraging techniques, its NAV may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Portfolio’s investments.
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
(Disclosures, Risks and Note about Historical Performance continued on next page)
3
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GLOBAL THEMATIC GROWTH PORTFOLIO |
DISCLOSURESAND RISKS | | |
(continued from previous page) | | AllianceBernstein Variable Products Series Fund |
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
4
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| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Global Thematic Growth Portfolio Class A† | | | 5.06% | | | | 6.06% | | | | 3.93% | |
Global Thematic Growth Portfolio Class B† | | | 4.81% | | | | 5.79% | | | | 3.68% | |
MSCI AC World Index (net) | | | 4.16% | | | | 9.17% | | | | 6.09% | |
* Average annual returns. † Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014 by 0.02%. | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.98% and 1.23% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
GLOBAL THEMATIC GROWTH PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Global Thematic Growth Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the MSCI AC World Index (net). The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 3-4.
5
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GLOBAL THEMATIC GROWTH PORTFOLIO |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The first line of each class’ table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The second line of each class’ table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each classes’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 974.10 | | | $ | 5.17 | | | | 1.04 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.96 | | | $ | 5.30 | | | | 1.04 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 972.90 | | | $ | 6.41 | | | | 1.29 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.70 | | | $ | 6.56 | | | | 1.29 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
6
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GLOBAL THEMATIC GROWTH PORTFOLIO |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
NIKE, Inc.—Class B | | $ | 2,720,084 | | | | 2.1 | % |
Visa, Inc.—Class A | | | 2,692,794 | | | | 2.1 | |
Roche Holding AG | | | 2,527,891 | | | | 2.0 | |
UnitedHealth Group, Inc. | | | 2,471,650 | | | | 1.9 | |
Colgate-Palmolive Co. | | | 2,435,488 | | | | 1.9 | |
Delphi Automotive PLC | | | 2,428,121 | | | | 1.9 | |
AIA Group Ltd. | | | 2,388,688 | | | | 1.9 | |
Abbott Laboratories | | | 2,380,207 | | | | 1.9 | |
Monsanto Co. | | | 2,292,629 | | | | 1.8 | |
Google, Inc.—Class C | | | 2,287,734 | | | | 1.8 | |
| | | | | | | | |
| | $ | 24,625,286 | | | | 19.3 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Information Technology | | $ | 30,499,413 | | | | 23.9 | % |
Consumer Discretionary | | | 28,923,536 | | | | 22.7 | |
Health Care | | | 23,753,345 | | | | 18.6 | |
Consumer Staples | | | 15,297,526 | | | | 12.0 | |
Financials | | | 15,099,462 | | | | 11.9 | |
Energy | | | 7,649,324 | | | | 6.0 | |
Materials | | | 2,292,629 | | | | 1.8 | |
Industrials | | | 2,269,464 | | | | 1.8 | |
Telecommunication Services | | | 1,255,941 | | | | 1.0 | |
Short-Term Investments | | | 399,944 | | | | 0.3 | |
| | | | | | | | |
Total Investments | | $ | 127,440,584 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The portfolio also enters into derivatives transactions, which may be used for hedging or investment purpose (see “Portfolio of Investments” section of the report for additional details). |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
7
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GLOBAL THEMATIC GROWTH PORTFOLIO |
COUNTRY BREAKDOWN* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
United States | | $ | 67,335,133 | | | | 52.8 | % |
Switzerland | | | 7,580,946 | | | | 5.9 | |
Japan | | | 6,603,589 | | | | 5.2 | |
Hong Kong | | | 5,323,790 | | | | 4.2 | |
United Kingdom | | | 4,919,049 | | | | 3.9 | |
India | | | 4,637,732 | | | | 3.6 | |
Singapore | | | 3,388,978 | | | | 2.7 | |
Netherlands | | | 3,151,340 | | | | 2.5 | |
France | | | 3,097,893 | | | | 2.4 | |
Brazil | | | 2,883,481 | | | | 2.3 | |
China | | | 2,450,976 | | | | 1.9 | |
Indonesia | | | 2,264,966 | | | | 1.8 | |
Belgium | | | 2,209,186 | | | | 1.7 | |
Other | | | 11,193,581 | | | | 8.8 | |
Short-Term Investments | | | 399,944 | | | | 0.3 | |
| | | | | | | | |
Total Investments | | $ | 127,440,584 | | | | 100.0 | % |
* | | All data are as of December 31, 2014. The Portfolio’s country breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. “Other” country weightings represent 1.4% or less in the following countries: Austria, Germany, Italy, Mexico, Peru, Philippines, South Africa, Sweden and Taiwan. |
8
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GLOBAL THEMATIC GROWTH PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–99.6% | | | | | | | | |
INFORMATION TECHNOLOGY–23.9% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–1.4% | | | | | | | | |
CalAmp Corp.(a) | | | 56,340 | | | $ | 1,031,022 | |
Palo Alto Networks, Inc.(a) | | | 6,200 | | | | 759,934 | |
| | | | | | | | |
| | | | | | | 1,790,956 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–1.0% | | | | | | | | |
InvenSense, Inc.(a)(b) | | | 80,795 | | | | 1,313,727 | |
| | | | | | | | |
INTERNET SOFTWARE & SERVICES–4.3% | | | | | | | | |
Google, Inc.–Class C(a) | | | 4,346 | | | | 2,287,734 | |
LinkedIn Corp.–Class A(a) | | | 8,927 | | | | 2,050,621 | |
Tencent Holdings Ltd. | | | 79,100 | | | | 1,144,492 | |
| | | | | | | | |
| | | | | | | 5,482,847 | |
| | | | | | | | |
IT SERVICES–2.1% | | | | | | | | |
Visa, Inc.–Class A | | | 10,270 | | | | 2,692,794 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–7.7% | | | | | | | | |
ams AG | | | 36,950 | | | | 1,335,742 | |
Avago Technologies Ltd. | | | 19,790 | | | | 1,990,676 | |
MediaTek, Inc. | | | 98,000 | | | | 1,424,668 | |
NVIDIA Corp. | | | 83,078 | | | | 1,665,714 | |
NXP Semiconductors NV(a) | | | 22,440 | | | | 1,714,416 | |
Skyworks Solutions, Inc. | | | 23,570 | | | | 1,713,775 | |
| | | | | | | | |
| | | | | | | 9,844,991 | |
| | | | | | | | |
SOFTWARE–5.2% | | | | | | | | |
Mobileye NV(a)(b) | | | 37,950 | | | | 1,539,252 | |
NetSuite, Inc.(a) | | | 8,429 | | | | 920,194 | |
Salesforce.com, Inc.(a) | | | 27,242 | | | | 1,615,723 | |
ServiceNow, Inc.(a) | | | 17,080 | | | | 1,158,878 | |
Verint Systems, Inc.(a) | | | 24,220 | | | | 1,411,542 | |
| | | | | | | | |
| | | | | | | 6,645,589 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–2.2% | | | | | | | | |
Apple, Inc. | | | 13,405 | | | | 1,479,644 | |
Cray, Inc.(a) | | | 36,220 | | | | 1,248,865 | |
| | | | | | | | |
| | | | | | | 2,728,509 | |
| | | | | | | | |
| | | | | | | 30,499,413 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–22.7% | | | | | | | | |
AUTO COMPONENTS–1.9% | | | | | | | | |
Delphi Automotive PLC | | | 33,390 | | | | 2,428,121 | |
| | | | | | | | |
AUTOMOBILES–4.0% | | | | | | | | |
Harley-Davidson, Inc. | | | 24,470 | | | | 1,612,818 | |
Nissan Motor Co., Ltd. | | | 111,400 | | | | 971,605 | |
Tata Motors Ltd.–Class A | | | 242,474 | | | | 1,283,511 | |
Volkswagen AG (Preference Shares) | | | 5,756 | | | | 1,279,302 | |
| | | | | | | | |
| | | | | | | 5,147,236 | |
| | | | | | | | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–1.4% | | | | | | | | |
Kroton Educacional SA | | | 316,900 | | | $ | 1,847,848 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–3.1% | | | | | | | | |
Alsea SAB de CV(a)(b) | | | 263,205 | | | | 724,121 | |
Melco Crown Entertainment Ltd. (ADR) | | | 54,240 | | | | 1,377,696 | |
Yum! Brands, Inc. | | | 25,060 | | | | 1,825,621 | |
| | | | | | | | |
| | | | | | | 3,927,438 | |
| | | | | | | | |
INTERNET & CATALOG RETAIL–3.4% | | | | | | | | |
Amazon.com, Inc.(a) | | | 4,063 | | | | 1,260,952 | |
JD.com, Inc. (ADR)(a) | | | 56,460 | | | | 1,306,484 | |
Priceline Group, Inc. (The)(a) | | | 1,590 | | | | 1,812,934 | |
| | | | | | | | |
| | | | | | | 4,380,370 | |
| | | | | | | | |
MEDIA–0.6% | | | | | | | | |
Comcast Corp.–Class A | | | 12,230 | | | | 709,462 | |
| | | | | | | | |
MULTILINE RETAIL–1.7% | | | | | | | | |
Lojas Renner SA | | | 36,000 | | | | 1,035,633 | |
Matahari Department Store Tbk PT | | | 919,000 | | | | 1,107,359 | |
| | | | | | | | |
| | | | | | | 2,142,992 | |
| | | | | | | | |
SPECIALTY RETAIL–1.9% | | | | | | | | |
Chow Tai Fook Jewellery Group Ltd.(b) | | | 768,600 | | | | 1,029,381 | |
Fast Retailing Co., Ltd. | | | 3,700 | | | | 1,346,412 | |
| | | | | | | | |
| | | | | | | 2,375,793 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–4.7% | | | | | | | | |
Cie Financiere Richemont SA | | | 22,560 | | | | 2,000,138 | |
NIKE, Inc.–Class B | | | 28,290 | | | | 2,720,084 | |
Samsonite International SA | | | 419,800 | | | | 1,244,054 | |
| | | | | | | | |
| | | | | | | 5,964,276 | |
| | | | | | | | |
| | | | | | | 28,923,536 | |
| | | | | | | | |
HEALTH CARE–18.6% | | | | | | | | |
BIOTECHNOLOGY–1.6% | | | | | | | | |
Cepheid(a) | | | 36,697 | | | | 1,986,776 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–3.8% | | | | | | | | |
Abbott Laboratories | | | 52,870 | | | | 2,380,207 | |
Elekta AB–Class B(b) | | | 73,740 | | | | 753,902 | |
Essilor International SA | | | 14,980 | | | | 1,670,559 | |
| | | | | | | | |
| | | | | | | 4,804,668 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–1.9% | | | | | | | | |
UnitedHealth Group, Inc. | | | 24,450 | | | | 2,471,650 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–2.5% | | | | | | | | |
Illumina, Inc.(a) | | | 7,821 | | | | 1,443,600 | |
Quintiles Transnational Holdings, Inc.(a) | | | 30,708 | | | | 1,807,780 | |
| | | | | | | | |
| | | | | | | 3,251,380 | |
| | | | | | | | |
9
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
PHARMACEUTICALS–8.8% | | | | | | | | |
Aspen Pharmacare Holdings Ltd.(a) | | | 49,820 | | | $ | 1,738,024 | |
Bristol-Myers Squibb Co. | | | 32,130 | | | | 1,896,634 | |
Kalbe Farma Tbk PT | | | 7,852,000 | | | | 1,157,607 | |
Perrigo Co. PLC | | | 13,530 | | | | 2,261,675 | |
Roche Holding AG | | | 9,330 | | | | 2,527,891 | |
Sun Pharmaceutical Industries Ltd. | | | 126,730 | | | | 1,657,040 | |
| | | | | | | | |
| | | | | | | 11,238,871 | |
| | | | | | | | |
| | | | | | | 23,753,345 | |
| | | | | | | | |
CONSUMER STAPLES–12.0% | | | | | | | | |
BEVERAGES–1.7% | | | | | | | | |
Anheuser-Busch InBev NV | | | 19,630 | | | | 2,209,186 | |
| | | | | | | | |
FOOD PRODUCTS–5.5% | | | | | | | | |
Danone SA | | | 21,832 | | | | 1,427,334 | |
Mead Johnson Nutrition Co.– Class A | | | 19,930 | | | | 2,003,762 | |
Nestle SA | | | 20,480 | | | | 1,493,012 | |
Universal Robina Corp. | | | 363,391 | | | | 1,584,344 | |
WH Group Ltd.(a)(c) | | | 928,000 | | | | 528,025 | |
| | | | | | | | |
| | | | | | | 7,036,477 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–3.6% | | | | | | | | |
Colgate-Palmolive Co. | | | 35,200 | | | | 2,435,488 | |
Unicharm Corp. | | | 86,500 | | | | 2,073,325 | |
| | | | | | | | |
| | | | | | | 4,508,813 | |
| | | | | | | | |
PERSONAL PRODUCTS–1.2% | | | | | | | | |
Estee Lauder Cos., Inc. (The)–Class A | | | 20,250 | | | | 1,543,050 | |
| | | | | | | | |
| | | | | | | 15,297,526 | |
| | | | | | | | |
FINANCIALS–11.8% | | | | | | | | |
BANKS–3.0% | | | | | | | | |
Credicorp Ltd. | | | 7,860 | | | | 1,259,015 | |
ING Groep NV(a) | | | 111,220 | | | | 1,436,924 | |
UniCredit SpA | | | 170,860 | | | | 1,094,463 | |
| | | | | | | | |
| | | | | | | 3,790,402 | |
| | | | | | | | |
CAPITAL MARKETS–1.2% | | | | | | | | |
UBS Group AG(a) | | | 91,490 | | | | 1,559,905 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–2.5% | | | | | | | | |
Intercontinental Exchange, Inc. | | | 8,090 | | | | 1,774,056 | |
London Stock Exchange Group PLC | | | 39,980 | | | | 1,375,672 | |
| | | | | | | | |
| | | | | | | 3,149,728 | |
| | | | | | | | |
INSURANCE–2.7% | | | | | | | | |
AIA Group Ltd. | | | 434,600 | | | | 2,388,688 | |
St James’s Place PLC | | | 88,450 | | | | 1,115,256 | |
| | | | | | | | |
| | | | | | | 3,503,944 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–1.1% | | | | | | | | |
Global Logistic Properties Ltd. | | | 750,000 | | | | 1,398,302 | |
| | | | | | | | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–1.3% | | | | | | | | |
Housing Development Finance Corp. Ltd. | | | 94,890 | | | $ | 1,697,181 | |
| | | | | | | | |
| | | | | | | 15,099,462 | |
| | | | | | | | |
ENERGY–6.0% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–2.9% | | | | | | | | |
Oceaneering International, Inc. | | | 27,320 | | | | 1,606,689 | |
Schlumberger Ltd. | | | 24,590 | | | | 2,100,232 | |
| | | | | | | | |
| | | | | | | 3,706,921 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–3.1% | | | | | | | | |
Concho Resources, Inc.(a) | | | 21,925 | | | | 2,187,019 | |
Noble Energy, Inc. | | | 37,010 | | | | 1,755,384 | |
| | | | | | | | |
| | | | | | | 3,942,403 | |
| | | | | | | | |
| | | | | | | 7, 649,324 | |
| | | | | | | | |
MATERIALS–1.8% | | | | | | | | |
CHEMICALS–1.8% | | | | | | | | |
Monsanto Co. | | | 19,190 | | | | 2,292,629 | |
| | | | | | | | |
INDUSTRIALS–1.8% | | | | | | | | |
AEROSPACE & DEFENSE–1.0% | | | | | | | | |
Hexcel Corp.(a) | | | 31,650 | | | | 1,313,158 | |
| | | | | | | | |
MACHINERY–0.8% | | | | | | | | |
FANUC Corp. | | | 5,800 | | | | 956,306 | |
| | | | | | | | |
| | | | | | | 2,269,464 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–1.0% | | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–1.0% | | | | | | | | |
SoftBank Corp. | | | 21,100 | | | | 1,255,941 | |
| | | | | | | | |
Total Common Stocks (cost $107,764,977) | | | | | | | 127,040,640 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–0.3% | | | | | | | | |
TIME DEPOSIT–0.3% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $399,944) | | $ | 400 | | | | 399,944 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–99.9% (cost $108,164,921) | | | | | | | 127,440,584 | |
| | | | | | | | |
10
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–3.1% | | | | | | | | |
INVESTMENT COMPANIES–3.1% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(d)(e) (cost $3,994,969) | | | 3,994,969 | | | $ | 3,994,969 | |
| | | | | | | | |
| | | | | | | | |
TOTAL INVESTMENTS–103.0% (cost $112,159,890) | | | | | | $ | 131,435,553 | |
Other assets less liabilities–(3.0)% | | | | | | | (3,821,358 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 127,614,195 | |
| | | | | | | | |
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
Barclays Bank PLC | | | USD | | | | 266 | | | | RUB | | | | 16,955 | | | | 1/22/15 | | | $ | 15,013 | |
Deutsche Bank AG | | | USD | | | | 2,276 | | | | CAD | | | | 2,618 | | | | 3/18/15 | | | | (26,728 | ) |
Deutsche Bank AG | | | USD | | | | 2,623 | | | | JPY | | | | 316,554 | | | | 3/18/15 | | | | 21,141 | |
Goldman Sachs Bank USA | | | BRL | | | | 4,243 | | | | USD | | | | 1,597 | | | | 1/05/15 | | | | 1,202 | |
Goldman Sachs Bank USA | | | USD | | | | 1,598 | | | | BRL | | | | 4,243 | | | | 1/05/15 | | | | (1,924 | ) |
Goldman Sachs Bank USA | | | BRL | | | | 4,243 | | | | USD | | | | 1,584 | | | | 2/03/15 | | | | 657 | |
Goldman Sachs Bank USA | | | USD | | | | 1,657 | | | | AUD | | | | 2,010 | | | | 3/18/15 | | | | (24,987 | ) |
JPMorgan Chase Bank | | | BRL | | | | 4,243 | | | | USD | | | | 1,666 | | | | 1/05/15 | | | | 69,983 | |
JPMorgan Chase Bank | | | USD | | | | 1,597 | | | | BRL | | | | 4,243 | | | | 1/05/15 | | | | (1,202 | ) |
Standard Chartered Bank | | | HKD | | | | 45,884 | | | | USD | | | | 5,919 | | | | 3/18/15 | | | | 2,366 | |
State Street Bank & Trust Co. | | | CHF | | | | 3,248 | | | | USD | | | | 3,327 | | | | 3/18/15 | | | | 55,632 | |
State Street Bank & Trust Co. | | | USD | | | | 891 | | | | EUR | | | | 724 | | | | 3/18/15 | | | | (14,061 | ) |
State Street Bank & Trust Co. | | | USD | | | | 325 | | | | NOK | | | | 2,339 | | | | 3/18/15 | | | | (11,781 | ) |
State Street Bank & Trust Co. | | | USD | | | | 302 | | | | SEK | | | | 2,283 | | | | 3/18/15 | | | | (9,305 | ) |
UBS AG | | | RUB | | | | 16,955 | | | | USD | | | | 306 | | | | 1/22/15 | | | | 24,423 | |
UBS AG | | | USD | | | | 2,861 | | | | GBP | | | | 1,832 | | | | 3/18/15 | | | | (7,014 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | $ 93,415 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the market value of this security amounted to $528,025 or 0.4% of net assets. |
(d) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
(e) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
Currency Abbreviations:
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
CHF—Swiss Franc
EUR—Euro
GBP—Great British Pound
HKD—Hong Kong Dollar
JPY—Japanese Yen
NOK—Norwegian Krone
RUB—Russian Ruble
SEK—Swedish Krona
USD—United States Dollar
Glossary:
ADR—American Depositary Receipt
See notes to financial statements.
11
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $108,164,921) | | $ | 127,440,584 | (a) |
Affiliated issuers (cost $3,994,969—investment of cash collateral for securities loaned) | | | 3,994,969 | |
Foreign currencies, at value (cost $237,434) | | | 229,632 | |
Unrealized appreciation on forward currency exchange contracts | | | 190,417 | |
Dividends and interest receivable | | | 155,084 | |
Receivable for capital stock sold | | | 21,659 | |
| | | | |
Total assets | | | 132,032,345 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 3,994,969 | |
Payable for capital stock redeemed | | | 105,895 | |
Unrealized depreciation on forward currency exchange contracts | | | 97,002 | |
Advisory fee payable | | | 82,831 | |
Distribution fee payable | | | 20,930 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 104,101 | |
| | | | |
Total liabilities | | | 4,418,150 | |
| | | | |
NET ASSETS | | $ | 127,614,195 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 5,989 | |
Additional paid-in capital | | | 154,254,540 | |
Accumulated net investment loss | | | (307,964 | ) |
Accumulated net realized loss on investment and foreign currency transactions | | | (45,693,745 | ) |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 19,355,375 | |
| | | | |
| | $ | 127,614,195 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 30,886,295 | | | | 1,416,627 | | | $ | 21.80 | |
B | | $ | 96,727,900 | | | | 4,572,845 | | | $ | 21.15 | |
(a) | | Includes securities on loan with a value of $3,829,923 (see Note E). |
See notes to financial statements.
12
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $92,665) | | $ | 1,534,231 | |
Affiliated issuers | | | 2,275 | |
Interest | | | 241 | |
Securities lending income | | | 149,739 | |
| | | | |
| | | 1,686,486 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 995,970 | |
Distribution fee—Class B | | | 252,112 | |
Transfer agency—Class A | | | 1,498 | |
Transfer agency—Class B | | | 4,748 | |
Custodian | | | 104,308 | |
Printing | | | 69,780 | |
Audit and tax | | | 60,670 | |
Administrative | | | 48,204 | |
Legal | | | 36,472 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 11,319 | |
| | | | |
Total expenses | | | 1,589,584 | |
| | | | |
Net investment income | | | 96,902 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 14,853,075 | |
Foreign currency transactions | | | (766,761 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | (7,922,488 | ) |
Foreign currency denominated assets and liabilities | | | 79,799 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 6,243,625 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 6,340,527 | |
| | | | |
See notes to financial statements.
13
| | |
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 96,902 | | | $ | 20,715 | |
Net realized gain on investment and foreign currency transactions | | | 14,086,314 | | | | 10,129,091 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | (7,842,689 | ) | | | 16,927,001 | |
| | | | | | | | |
Net increase in net assets from operations | | | 6,340,527 | | | | 27,076,807 | |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | –0 | – | | | (74,183 | ) |
Class B | | | –0 | – | | | (19,394 | ) |
Return of capital | | | | | | | | |
Class A | | | –0 | – | | | (6,024 | ) |
Class B | | | –0 | – | | | (1,575 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (12,309,423 | ) | | | (25,487,404 | ) |
| | | | | | | | |
Total increase (decrease) | | | (5,968,896 | ) | | | 1,488,227 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 133,583,091 | | | | 132,094,864 | |
| | | | | | | | |
End of period (including accumulated net investment loss of ($307,964) and distributions in excess of net investment income of ($36,593), respectively) | | $ | 127,614,195 | | | $ | 133,583,091 | |
| | | | | | | | |
See notes to financial statements.
14
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Global Thematic Growth Portfolio (the “Portfolio”), formerly AllianceBernstein Global Technology Portfolio, is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
15
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stock: | | | | | | | | | | | | | | | | |
Information Technology | | $ | 26,594,511 | | | $ | 3,904,902 | | | $ | –0 | – | | $ | 30,499,413 | |
Consumer Discretionary | | | 18,661,774 | | | | 10,261,762 | | | | –0 | – | | | 28,923,536 | |
Health Care | | | 15,002,224 | | | | 8,751,121 | | | | –0 | – | | | 23,753,345 | |
Consumer Staples | | | 5,982,300 | | | | 9,315,226 | | | | –0 | – | | | 15,297,526 | |
Financials | | | 4,592,976 | | | | 10,506,486 | | | | –0 | – | | | 15,099,462 | |
Energy | | | 7,649,324 | | | | –0 | – | | | –0 | – | | | 7,649,324 | |
Materials | | | 2,292,629 | | | | –0 | – | | | –0 | – | | | 2,292,629 | |
Industrials | | | 1,313,158 | | | | 956,306 | | | | –0 | – | | | 2,269,464 | |
Telecommunication Services | | | –0 | – | | | 1,255,941 | | | | –0 | – | | | 1,255,941 | |
Short-Term Investments | | | –0 | – | | | 399,944 | | | | –0 | – | | | 399,944 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 3,994,969 | | | | –0 | – | | | –0 | – | | | 3,994,969 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 86,083,865 | | | | 45,351,688 | + | | | –0 | – | | | 131,435,553 | |
Other Financial Instruments*: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | | –0 | – | | | 190,417 | | | | –0 | – | | | 190,417 | |
Liabilities: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | | –0 | – | | | (97,002 | ) | | | –0 | – | | | (97,002 | ) |
| | | | | | | | | | | | | | | | |
Total^(a) | | $ | 86,083,865 | | | $ | 45,445,103 | | | $ | –0 | – | | $ | 131,528,968 | |
| | | | | | | | | | | | | | | | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
+ | | A significant portion of the Portfolio’s foreign equity investments are categorized as Level 2 investments since they are valued using fair value prices based on third party vendor modeling tools to the extent available, see Note A.1. |
^ | | There were no transfers from Level 1 to Level 2 during the reporting period. |
(a) | | An amount of $2,116,921 was transferred from Level 2 to Level 1 as the above mentioned foreign equity fair valuation by the third party vendor was not applied during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
17
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, ..65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,204.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $100,481, of which $32 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
18
| | |
| | AllianceBernstein Variable Products Series Fund |
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 63,055,090 | | | $ | 75,032,752 | |
U.S. government securities | | | –0 | – | | | –0 | – |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 112,437,361 | |
| | | | |
Gross unrealized appreciation | | | 22,516,256 | |
Gross unrealized depreciation | | | (3,518,064 | ) |
| | | | |
Net unrealized appreciation | | $ | 18,998,192 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal type of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:
| • | | Forward Currency Exchange Contracts |
The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Portfolio. 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.
During the year ended December 31, 2014, the Portfolio held forward currency exchange contracts for hedging purposes.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolio and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
19
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Portfolio’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
At December 31, 2014, the Portfolio had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | $ | 190,417 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 97,002 | |
| | | | | | | | | | | | |
Total | | | | $ | 190,417 | | | | | $ | 97,002 | |
| | | | | | | | | | | | |
The effect of derivative instruments on the statement of operations for the year ended December 31, 2014:
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Foreign exchange contracts | | Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities | | $ | (851,198 | ) | | $ | 91,786 | |
| | | | | | | | | | |
Total | | | | $ | (851,198 | ) | | $ | 91,786 | |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2014:
| | | | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 23,966,149 | |
Average principal amount of sale contracts | | $ | 19,116,232 | |
For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Portfolio as of December 31, 2014:
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Received | | | Security Collateral Received | | | Net Amount of Derivatives Assets | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Barclays Bank PLC | | $ | 15,013 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 15,013 | |
Deutsche Bank AG | | | 21,141 | | | | (21,141 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Goldman Sachs Bank USA | | | 1,859 | | | | (1,859 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank | | | 69,983 | | | | (1,202 | ) | | | –0 | – | | | –0 | – | | | 68,781 | |
Standard Chartered Bank | | | 2,366 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 2,366 | |
State Street Bank & Trust Co. | | | 55,632 | | | | (35,147 | ) | | | –0 | – | | | –0 | – | | | 20,485 | |
UBS AG | | | 24,423 | | | | (7,014 | ) | | | –0 | – | | | –0 | – | | | 17,409 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 190,417 | | | $ | (66,363 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 124,054 | ^ |
| | | | | | | | | | | | | | | | | | | | |
20
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Pledged | | | Security Collateral Pledged | | | Net Amount of Derivatives Liabilities | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Deutsche Bank AG | | $ | 26,728 | | | $ | (21,141 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 5,587 | |
Goldman Sachs Bank USA | | | 26,911 | | | | (1,859 | ) | | | –0 | – | | | –0 | – | | | 25,052 | |
JPMorgan Chase Bank | | | 1,202 | | | | (1,202 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 35,147 | | | | (35,147 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
UBS AG | | | 7,014 | | | | (7,014 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 97,002 | | | $ | (66,363 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 30,639 | ^ |
| | | | | | | | | | | | | | | | | | | | |
^ | | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $3,829,923 and had received cash collateral which has been invested into AB Exchange Reserves of $3,994,969. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $149,739 and $2,275 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 1,350 | | | $ | 28,457 | | | $ | 25,812 | | | $ | 3,995 | |
21
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 176,301 | | | | 144,991 | | | | | $ | 3,806,795 | | | $ | 2,658,807 | |
Shares issued in reinvestment of dividends and distributions | | | –0 | – | | | 4,357 | | | | | | –0 | – | | | 80,207 | |
Shares redeemed | | | (311,370 | ) | | | (980,306 | ) | | | | | (6,660,284 | ) | | | (18,090,881 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (135,069 | ) | | | (830,958 | ) | | | | $ | (2,853,489 | ) | | $ | (15,351,867 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 731,986 | | | | 638,321 | | | | | $ | 15,358,776 | | | $ | 11,410,760 | |
Shares issued in reinvestment of dividends and distributions | | | –0 | – | | | 1,169 | | | | | | –0 | – | | | 20,969 | |
Shares redeemed | | | (1,183,248 | ) | | | (1,208,972 | ) | | | | | (24,814,710 | ) | | | (21,567,266 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (451,262 | ) | | | (569,482 | ) | | | | $ | (9,455,934 | ) | | $ | (10,135,537 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
22
| | |
| | AllianceBernstein Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | –0 | – | | $ | 93,577 | |
| | | | | | | | |
Total taxable distributions | | | –0 | – | | | 93,577 | |
Tax return of capital | | | –0 | – | | | 7,599 | |
| | | | | | | | |
Total distributions paid | | $ | –0 | – | | $ | 101,176 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Accumulated capital and other losses | | $ | (45,633,189 | )(a) |
Unrealized appreciation/(depreciation) | | | 18,986,855 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | (26,646,334 | ) |
| | | | |
(a) | | On December 31, 2014, the Portfolio had a net capital loss carryforward of $45,416,274. During the fiscal year, the Portfolio utilized $14,519,928 of capital loss carryforwards to offset current year net realized gains. At December 31, 2014, the Portfolio had a qualified late-year ordinary loss deferral of $216,915 which is deemed to arise on January 1, 2015. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of gains/losses on certain derivative instruments. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
As of December 31, 2014, the Portfolio had a net capital loss carryforward of $45,416,274 which will expire as follows:
| | | | |
SHORT-TERM AMOUNT | | LONG-TERM AMOUNT | | EXPIRATION |
$26,615,714 | | n/a | | 2016 |
18,800,560 | | n/a | | 2017 |
During the current fiscal year, permanent differences primarily due to foreign currency reclassifications and the disallowance of a net operating loss resulted in a net decrease in undistributed net investment income, a net decrease in accumulated net realized loss on investment and foreign currency transactions, and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
23
| | |
|
GLOBAL THEMATIC GROWTH PORTFOLIO |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $20.75 | | | | $16.88 | | | | $14.87 | | | | $19.47 | | | | $16.73 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .06 | | | | .04 | | | | .13 | | | | .02 | | | | .12 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .99 | | | | 3.88 | | | | 1.88 | | | | (4.52 | ) | | | 2.98 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 1.05 | | | | 3.92 | | | | 2.01 | | | | (4.50 | ) | | | 3.10 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.05 | ) | | | –0 | – | | | (.10 | ) | | | (.36 | ) |
Tax return of capital | | | –0 | – | | | (.00 | )(b) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | –0 | – | | | (.05 | ) | | | –0 | – | | | (.10 | ) | | | (.36 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $21.80 | | | | $20.75 | | | | $16.88 | | | | $14.87 | | | | $19.47 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 5.06 | % | | | 23.26 | % | | | 13.52 | % | | | (23.23 | )% | | | 18.93 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $30,886 | | | | $32,195 | | | | $40,231 | | | | $42,094 | | | | $66,302 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.01 | % | | | .98 | % | | | .99 | % | | | .94 | % | | | .99 | %+ |
Net investment income | | | .26 | % | | | .22 | % | | | .83 | % | | | .10 | % | | | .69 | %+ |
Portfolio turnover rate | | | 48 | % | | | 96 | % | | | 152 | % | | | 163 | % | | | 117 | % |
See footnote summary on page 25.
24
| | |
| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $20.18 | | | | $16.42 | | | | $14.50 | | | | $18.99 | | | | $16.34 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a) | | | .00 | (b) | | | (.01 | ) | | | .09 | | | | (.03 | ) | | | .07 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .97 | | | | 3.77 | | | | 1.83 | | | | (4.40 | ) | | | 2.90 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .97 | | | | 3.76 | | | | 1.92 | | | | (4.43 | ) | | | 2.97 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.00 | )(b) | | | –0 | – | | | (.06 | ) | | | (.32 | ) |
Tax return of capital | | | –0 | – | | | (.00 | )(b) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | –0 | – | | | (.00 | ) | | | –0 | – | | | (.06 | ) | | | (.32 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $21.15 | | | | $20.18 | | | | $16.42 | | | | $14.50 | | | | $18.99 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 4.81 | % | | | 22.93 | % | | | 13.24 | % | | | (23.41 | )% | | | 18.58 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $96,728 | | | | $101,388 | | | | $91,864 | | | | $99,084 | | | | $141,649 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.26 | % | | | 1.23 | % | | | 1.24 | % | | | 1.19 | % | | | 1.24 | %+ |
Net investment income (loss) | | | .01 | % | | | (.06 | )% | | | .58 | % | | | (.14 | )% | | | .44 | %+ |
Portfolio turnover rate | | | 48 | % | | | 96 | % | | | 152 | % | | | 163 | % | | | 117 | % |
(a) | | Based on average shares outstanding. |
(b) | | Amount is less than $.005. |
(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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2013, December 31, 2012, December 31, 2011 and December 31, 2010 by 0.02%, 0.05%, 0.07%, 0.04% and 0.04%, respectively. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
25
| | |
| | |
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Global Thematic Growth Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Global Thematic Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Global Thematic Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
26
| | |
| | |
GLOBAL THEMATIC GROWTH | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief |
Michael J. Downey(1) | | Executive Officer |
William H. Foulk, Jr.(1) | | Garry L. Moody(1) |
D. James Guzy(1) | | Earl D. Weiner(1) |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer | | Joseph J. Mantineo, Treasurer and Chief Financial Officer |
Daniel C. Roarty(2), Vice President | | Phyllis J. Clarke, Controller |
Tassos M. Stassopoulos(2), Vice President
Emilie D. Wrapp, Secretary | | Vincent S. Noto, Chief Compliance Officer |
| | |
CUSTODIAN and ACCOUNTING AGENT | | LEGAL COUNSEL |
State Street Bank and Trust Company | | Seward & Kissel LLP |
State Street Corporation CCB/5 | | One Battery Park Plaza |
1 Iron Street | | New York, NY 10004 |
Boston, MA 02210 | | |
| | |
DISTRIBUTOR | | TRANSFER AGENT |
AllianceBernstein Investments, Inc. | | AllianceBernstein Investor Services, Inc. |
1345 Avenue of the Americas | | P.O. Box 786003 |
New York, NY 10105 | | San Antonio, TX 78278-6003 |
| | Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC | | |
ACCOUNTING FIRM | | |
Ernst & Young LLP | | |
5 Times Square | | |
New York, NY 10036 | | |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Adviser’s Global Growth and Thematic Investment Team. Messrs. Roarty and Stassopoulos are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
27
| | |
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999–June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989–May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
| | | | | | | | |
28
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
29
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105 |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to this position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
30
| | |
| | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS,* AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith
54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Daniel C. Roarty 43 | | Vice President
| | Senior Vice President of the Adviser**, and Technology Sector Head, with which he has been associated since May 2011. Prior thereto, he was in research and portfolio management at Nuveen Investments since prior to 2010. |
| | | | |
Tassos M. Stassopoulos 46 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
31
| | |
| | |
GLOBAL THEMATIC GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Global Thematic Growth Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In Jones, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 03/31/14 ($MIL) |
Global Thematic Growth Portfolio | | Specialty | | 0.75% on 1st $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | $132.9 |
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
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| | AllianceBernstein Variable Products Series Fund |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $54,101 (0.041% of the Portfolio’s average daily net assets) for such services.
Set forth below are the Portfolio’s total expense ratios for the most recently completed fiscal year:
| | | | | | |
Portfolio | | Total Expense Ratio | | Fiscal Year | |
Global Thematic Growth Portfolio | | Class A 0.98% | | | December 31 | |
| | Class B 1.23% | | | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($MIL ) | | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Global Thematic Growth Portfolio | | $ | 132.9 | | | Global Thematic Research Schedule | | | 0.550 | % | | | 0.750 | % |
| | | | | | 0.80% on 1st $25m | | | | | | | | |
| | | | | | 0.60% on next $25m | | | | | | | | |
| | | | | | 0.50% on next $50m | | | | | | | | |
| | | | | | 0.40% on the balance | | | | | | | | |
| | | | | | Minimum account size $25m | | | | | | | | |
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
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GLOBAL THEMATIC GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser also manages AllianceBernstein Global Thematic Growth Fund, Inc. (“Global Thematic Growth Fund, Inc.), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Global Thematic Growth Fund, Inc. and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Global Thematic Growth Portfolio7 | | Global Thematic Growth Fund, Inc. | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750 | % | | | 0.750 | % |
The Adviser also manages and sponsors retail mutual funds, which are organized in jurisdictions outside the United States, generally Luxembourg and Japan, and sold to non-United States resident investors. The Adviser charges the fees set forth for Thematic Research Growth Portfolio, a Luxembourg fund that has a somewhat similar investment style as the Portfolio.
| | | | |
Fund | | Fee8 | |
Thematic Research Growth Portfolio Class A | | | 1.70 | % |
Class I (Institutional) | | | 0.90 | % |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Portfolio.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.9 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.10,11
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
The Portfolio’s original EG had an insufficient number of peers. Consequently, Lipper expanded the Portfolio’s EG to include peers that have a similar but not the same Lipper classification/objective as the Portfolio. However, because Lipper had expanded the Portfolio’s EG, under Lipper’s standard guidelines, the Portfolio’s Lipper Expense Universe (“EU”) was also
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The advisory fees of AllianceBernstein Global Thematic Growth Fund, Inc. are based on the mutual fund’s net assets at the end of each quarter and are paid to the Adviser quarterly, in contrast to the Portfolio, whose advisory fees are based on the Portfolio’s average daily net assets and are paid on a monthly basis. |
8 | | Class A shares of the fund are charged an “all-in” fee, which includes investment advisory services and distribution related services, unlike Class I shares, whose fee is for only investment advisory services. |
9 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
10 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
11 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
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| | AllianceBernstein Variable Products Series Fund |
expanded to include universes of those peers that had a similar but not the same Lipper investment objective/classification. A “normal” EU will include funds that have the same investment objective/classification as the subject portfolio.12
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)13 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Global Thematic Growth Portfolio14 | | | 0.750 | | | | 0.754 | | | | 4/10 | |
Set forth below is a comparison of the Portfolio’s total expense ratio and the medians of the Portfolio’s EG and EU. The Portfolio’s total expense ratio ranking is also shown in the table below.
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)15 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Global Thematic Growth Portfolio16 | | | 0.977 | | | | 0.906 | | | | 7/10 | | | | 0.891 | | | | 11/15 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $235,491 in Rule 12b-1 fees.
12 | | Except for asset size comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
13 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
14 | | The Portfolio’s EG includes the Portfolio, four other variable insurance product (“VIP”) Global Growth funds (“GLGE”) and five VIP Global Core funds (“GLCE”). |
15 | | Most recently completed fiscal year end Class A total expense ratio. |
16 | | The Portfolio’s EU includes the Portfolio, EG and all other VIP GLGE and VIP GLCE funds, excluding outliers. |
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GLOBAL THEMATIC GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $547,931 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.17
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.18,19 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.20 The independent consultant then
17 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
18 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
19 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
20 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
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| | AllianceBernstein Variable Products Series Fund |
discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio21 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)22 for the periods ended February 28, 2014.23
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Global Thematic Growth Portfolio24 | | | | | | | | | |
1 year | | | 26.45 | | | | 26.21 | | | | 22.81 | | | | 2/5 | | | | 4/15 | |
3 year | | | 2.86 | | | | 10.36 | | | | 10.35 | | | | 5/5 | | | | 14/14 | |
5 year | | | 17.89 | | | | 20.80 | | | | 21.55 | | | | 5/5 | | | | 13/13 | |
10 year | | | 4.21 | | | | 6.86 | | | | 7.85 | | | | 3/3 | | | | 9/9 | |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)26 versus its benchmarks.27 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.28
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
Global Thematic Growth Portfolio24 | | | 26.45 | | | | 2.86 | | | | 17.89 | | | | 4.21 | | | | 5.35 | | | | 20.62 | | | | 0.89 | | | | 5 | |
MSCI AC World Index | | | 18.16 | | | | 8.35 | | | | 19.58 | | | | 6.87 | | | | N/A | | | | 16.36 | | | | 1.17 | | | | 5 | |
MSCI World (Net) Index25 | | | 21.68 | | | | 9.81 | | | | 19.98 | | | | 6.75 | | | | 6.45 | | | | N/A | | | | N/A | | | | N/A | |
Inception Date: January 11, 1996 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
21 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
22 | | The Portfolio’s PG/PU may not be identical to the Portfolio’s EG/EU as the criteria for including/excluding a fund from a PG/PU is somewhat different from that of an EG/EU. |
23 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
24 | | The Portfolio’s Lipper classification changed in 2009 from VA Science/Technology Funds to VA Global Growth as a result of changes to the Portfolio’s strategy. |
25 | | Benchmark since inception date is the nearest month end after the Portfolio’s inception date. |
26 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
27 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
28 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
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GLOBAL THEMATIC GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
38
VPS-GTG-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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GROWTH PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
The Portfolio’s broad-based index used for comparison purposes changed from the Russell 1000 Growth Index to the Russell 3000 Growth Index because the Russell 3000 Growth Index more closely reflects the Portfolio’s investments and performance.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in a domestic portfolio of equity securities of companies within various market sectors. AllianceBernstein L.P. (the “Adviser”) seeks to identify companies or industries for which other investors have underestimated earnings potential—for example, some hidden earnings driver (including, but not limited to, reduced competition, market share gain, better margin trend, increased customer base or similar factors) that would cause a company to grow faster than market forecasts.
In managing the Portfolio, the Adviser allocates investments among broad sector groups and selects specific investments based on the fundamental company research conducted by the Adviser’s large internal research staff, assessing the current and forecasted investment opportunities and conditions, as well as diversification and risk considerations. The Adviser’s research focus is on companies with high sustainable growth prospects, high or improving return on invested capital, transparent business models, and strong and lasting competitive advantages.
The Portfolio has the flexibility to invest across the capitalization spectrum. The Portfolio is designed for those seeking exposure to companies of various sizes, and typically has substantial investments in both large-capitalization companies and mid-capitalization companies, and may also invest in small-capitalization companies.
The Portfolio may enter into derivatives transactions, such as options, futures contracts, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds.
INVESTMENT RESULTS
The table on page 3 shows the Portfolio’s performance compared to its current benchmark, the Russell 3000 Growth Index and its prior benchmark, the Russell 1000 Growth Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio outperformed the current benchmark for the annual reporting period, but underperformed the prior benchmark. Versus the current benchmark, stock selection in the consumer staples sector drove returns. Stock selection and an overweight in the health care sector, one of the top performing sectors in 2014, also contributed to returns. Somewhat offsetting these gains was stock selection in the industrials and technology sectors, which detracted from performance.
The Portfolio did not utilize derivatives during the annual reporting period
MARKET REVIEW AND INVESTMENT STRATEGY
U.S. equity markets advanced for much of 2014 as a brightening U.S. economic outlook boosted risk appetites. Six years after the collapse of the global financial markets, investors grew increasingly confident that the U.S. economy was strengthening, buoyed by encouraging domestic data, strong corporate earnings and a slew of merger and acquisition activity. The U.S. Federal Reserve (the “Fed”) ended its quantitative easing program in October after gradually reducing its monthly government bond purchases during the course of the year. However, investors remained upbeat about U.S. stocks, as the Fed’s repeated commitment to its ultra low interest rate policy until at least mid-2015 allayed market anxiety about a premature end to the central bank’s stimulus campaign. A strengthening U.S. dollar also buoyed markets. Sector wise, health care stocks were the clear leader during the year, while energy was by far the worst-performing sector as oil prices tumbled due to the oversupply of the commodity and a slowing in global demand.
In this complex environment, a discerning approach is warranted. Despite new uncertainties and mixed macroeconomic signals, the Growth Investment Team believes the environment still appears favorable for active stock management, as investors increasingly reward companies for their fundamental strengths.
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GROWTH PORTFOLIO | | |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
Neither the unmanaged Russell 3000® Growth Index nor the unmanaged Russell 1000® Growth Index reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 3000 Growth Index represents the performance of 3,000 growth companies within the U.S. The Russell 1000 Growth Index represents the performance of 1,000 large-cap growth companies within the U.S. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Focused Portfolio Risk: Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Portfolio’s net asset value (“NAV”).
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month-end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
2
| | |
| | |
GROWTH PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Growth Portfolio Class A† | | | 13.28% | | | | 15.03% | | | | 6.81% | |
Growth Portfolio Class B† | | | 12.96% | | | | 14.74% | | | | 6.54% | |
Current Benchmark: Russell 3000 Growth Index | | | 12.44% | | | | 15.89% | | | | 8.50% | |
Prior Benchmark: Russell 1000 Growth Index | | | 13.05% | | | | 15.81% | | | | 8.49% | |
* Average annual returns. † Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014 by 0.03%. The Portfolio’s broad-based index used for comparison purposes changed from the Russell 1000 Growth Index to the Russell 3000 Growth Index because the Russell 3000 Growth Index more closely reflects the Portfolio’s investments and performance. Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 1.06% and 1.31% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
GROWTH PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in the Growth Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s current and prior benchmarks, the Russell 3000 Growth Index and the Russell 1000 Growth Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 2.
3
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| | |
GROWTH PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,086.90 | | | $ | 5.79 | | | | 1.10 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.66 | | | $ | 5.60 | | | | 1.10 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,085.30 | | | $ | 7.10 | | | | 1.35 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.40 | | | $ | 6.87 | | | | 1.35 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
4
| | |
GROWTH PORTFOLIO | | |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Apple, Inc. | | $ | 4,275,569 | | | | 5.7 | % |
Google, Inc. | | | 3,444,417 | | | | 4.6 | |
Allergan, Inc./United States | | | 2,629,951 | | | | 3.5 | |
Monster Beverage Corp. | | | 2,443,618 | | | | 3.3 | |
Visa, Inc.—Class A | | | 2,290,841 | | | | 3.1 | |
Facebook, Inc.—Class A | | | 2,286,532 | | | | 3.1 | |
Microsoft Corp. | | | 2,266,110 | | | | 3.0 | |
Comcast Corp.—Class A | | | 2,063,126 | | | | 2.8 | |
Starbucks Corp. | | | 2,061,917 | | | | 2.8 | |
Priceline Group, Inc. (The) | | | 2,003,349 | | | | 2.7 | |
| | | | | | | | |
| | $ | 25,765,430 | | | | 34.6 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Information Technology | | $ | 21,597,265 | | | | 29.0 | % |
Consumer Discretionary | | | 16,733,505 | | | | 22.5 | |
Health Care | | | 14,431,293 | | | | 19.4 | |
Consumer Staples | | | 7,850,038 | | | | 10.5 | |
Industrials | | | 5,188,749 | | | | 7.0 | |
Financials | | | 3,385,605 | | | | 4.5 | |
Energy | | | 2,496,857 | | | | 3.4 | |
Short-Term Investments | | | 2,780,621 | | | | 3.7 | |
| | | | | | | | |
Total Investments | | $ | 74,463,933 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
5
| | |
GROWTH PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–96.3% | | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–29.0% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.9% | | | | | | | | |
F5 Networks, Inc.(a) | | | 5,189 | | | $ | 676,983 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.7% | | | | | | | | |
Amphenol Corp.–Class A | | | 9,834 | | | | 529,167 | |
| | | | | | | | |
INTERNET SOFTWARE & SERVICES–8.4% | | | | | | | | |
Facebook, Inc.–Class A(a) | | | 29,307 | | | | 2,286,532 | |
Google, Inc.–Class A(a) | | | 3,379 | | | | 1,793,100 | |
Google, Inc.–Class C(a) | | | 3,137 | | | | 1,651,317 | |
HomeAway, Inc.(a) | | | 18,200 | | | | 541,996 | |
| | | | | | | | |
| | | | | | | 6,272,945 | |
| | | | | | | | |
IT SERVICES–3.1% | | | | | | | | |
Visa, Inc.–Class A | | | 8,737 | | | | 2,290,841 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–1.8% | | | | | | | | |
Altera Corp. | | | 12,040 | | | | 444,758 | |
Micron Technology, Inc.(a) | | | 26,210 | | | | 917,612 | |
| | | | | | | | |
| | | | | | | 1,362,370 | |
| | | | | | | | |
SOFTWARE–8.3% | | | | | | | | |
ANSYS, Inc.(a) | | | 8,336 | | | | 683,552 | |
Aspen Technology, Inc.(a) | | | 21,060 | | | | 737,521 | |
Microsoft Corp. | | | 48,786 | | | | 2,266,110 | |
NetSuite, Inc.(a) | | | 6,000 | | | | 655,020 | |
ServiceNow, Inc.(a) | | | 11,747 | | | | 797,034 | |
Tableau Software, Inc.–Class A(a) | | | 5,676 | | | | 481,098 | |
Ultimate Software Group, Inc. (The)(a) | | | 3,876 | | | | 569,055 | |
| | | | | | | | |
| | | | | | | 6,189,390 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–5.8% | | | | | | | | |
Apple, Inc. | | | 38,735 | | | | 4,275,569 | |
| | | | | | | | |
| | | | | | | 21,597,265 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–22.5% | | | | | | | | |
AUTOMOBILES–1.1% | | | | | | | | |
Harley-Davidson, Inc. | | | 12,650 | | | | 833,762 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–4.1% | | | | | | | | |
Starbucks Corp. | | | 25,130 | | | | 2,061,917 | |
Wyndham Worldwide Corp. | | | 11,240 | | | | 963,942 | |
| | | | | | | | |
| | | | | | | 3,025,859 | |
| | | | | | | | |
INTERNET & CATALOG RETAIL–2.7% | | | | | | | | |
Priceline Group, Inc. (The)(a) | | | 1,757 | | | | 2,003,349 | |
| | | | | | | | |
LEISURE PRODUCTS–0.8% | | | | | | | | |
Polaris Industries, Inc. | | | 3,956 | | | | 598,305 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MEDIA–4.7% | | | | | | | | |
AMC Networks, Inc.–Class A(a) | | | 9,557 | | | $ | 609,450 | |
Comcast Corp.–Class A | | | 35,565 | | | | 2,063,126 | |
Walt Disney Co. (The) | | | 8,338 | | | | 785,356 | |
| | | | | | | | |
| | | | | | | 3,457,932 | |
| | | | | | | | |
SPECIALTY RETAIL–7.3% | | | | | | | | |
Five Below, Inc.(a) | | | 14,589 | | | | 595,669 | |
Home Depot, Inc. (The) | | | 19,069 | | | | 2,001,673 | |
Lowe’s Cos., Inc. | | | 18,992 | | | | 1,306,650 | |
O’Reilly Automotive, Inc.(a) | | | 3,326 | | | | 640,654 | |
Ulta Salon Cosmetics & Fragrance, Inc.(a) | | | 7,122 | | | | 910,476 | |
| | | | | | | | |
| | | | | | | 5,455,122 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–1.8% | | | | | | | | |
NIKE, Inc.–Class B | | | 14,136 | | | | 1,359,176 | |
| | | | | | | | |
| | | | | | | 16,733,505 | |
| | | | | | | | |
HEALTH CARE–19.4% | | | | | | | | |
BIOTECHNOLOGY–4.6% | | | | | | | | |
Biogen Idec, Inc.(a) | | | 4,014 | | | | 1,362,552 | |
Gilead Sciences, Inc.(a) | | | 14,670 | | | | 1,382,794 | |
Vertex Pharmaceuticals, Inc.(a) | | | 5,513 | | | | 654,945 | |
| | | | | | | | |
| | | | | | | 3,400,291 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–3.0% | | | | | | | | |
Align Technology, Inc.(a) | | | 13,173 | | | | 736,502 | |
HeartWare International, Inc.(a) | | | 5,755 | | | | 422,590 | |
Intuitive Surgical, Inc.(a) | | | 2,050 | | | | 1,084,327 | |
| | | | | | | | |
| | | | | | | 2,243,419 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–3.9% | | | | | | | | |
McKesson Corp. | | | 4,543 | | | | 943,036 | |
Premier, Inc.–Class A(a) | | | 16,397 | | | | 549,791 | |
Team Health Holdings, Inc.(a) | | | 13,034 | | | | 749,846 | |
UnitedHealth Group, Inc. | �� | | 6,418 | | | | 648,796 | |
| | | | | | | | |
| | | | | | | 2,891,469 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–2.1% | | | | | | | | |
Illumina, Inc.(a) | | | 4,420 | | | | 815,843 | |
Quintiles Transnational Holdings, Inc.(a) | | | 12,863 | | | | 757,245 | |
| | | | | | | | |
| | | | | | | 1,573,088 | |
| | | | | | | | |
PHARMACEUTICALS–5.8% | | | | | | | | |
Allergan, Inc./United States | | | 12,371 | | | | 2,629,951 | |
Bristol-Myers Squibb Co. | | | 15,516 | | | | 915,910 | |
Endo International PLC(a) | | | 10,776 | | | | 777,165 | |
| | | | | | | | |
| | | | | | | 4,323,026 | |
| | | | | | | | |
| | | | | | | 14,431,293 | |
| | | | | | | | |
CONSUMER STAPLES–10.5% | | | | | | | | |
BEVERAGES–3.3% | | | | | | | | |
Monster Beverage Corp.(a) | | | 22,553 | | | | 2,443,618 | |
| | | | | | | | |
6
| | |
| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
FOOD & STAPLES RETAILING–4.6% | | | | | | | | |
Costco Wholesale Corp. | | | 11,485 | | | $ | 1,627,999 | |
CVS Health Corp. | | | 19,030 | | | | 1,832,779 | |
| | | | | | | | |
| | | | | | | 3,460,778 | |
| | | | | | | | |
FOOD PRODUCTS–1.6% | | | | | | | | |
Keurig Green Mountain, Inc. | | | 3,637 | | | | 481,520 | |
Mead Johnson Nutrition Co.–Class A | | | 7,342 | | | | 738,165 | |
| | | | | | | | |
| | | | | | | 1,219,685 | |
| | | | | | | | |
PERSONAL PRODUCTS–1.0% | | | | | | | | |
Estee Lauder Cos., Inc. (The)–Class A | | | 9,527 | | | | 725,957 | |
| | | | | | | | |
| | | | | | | 7,850,038 | |
| | | | | | | | |
INDUSTRIALS–7.0% | | | | | | | | |
AEROSPACE & DEFENSE–0.8% | | | | | | | | |
Precision Castparts Corp. | | | 2,429 | | | | 585,097 | |
| | | | | | | | |
AIRLINES–0.9% | | | | | | | | |
Spirit Airlines, Inc.(a) | | | 8,920 | | | | 674,174 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–1.1% | | | | | | | | |
AMETEK, Inc. | | | 15,152 | | | | 797,450 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–1.8% | | | | | | | | |
Danaher Corp. | | | 16,126 | | | | 1,382,159 | |
| | | | | | | | |
MACHINERY–1.2% | | | | | | | | |
Pall Corp. | | | 8,741 | | | | 884,677 | |
| | | | | | | | |
PROFESSIONAL SERVICES–1.2% | | | | | | | | |
Robert Half International, Inc. | | | 14,820 | | | | 865,192 | |
| | | | | | | | |
| | | | | | | 5,188,749 | |
| | | | | | | | |
FINANCIALS–4.5% | | | | | | | | |
CAPITAL MARKETS–2.3% | | | | | | | | |
Affiliated Managers Group, Inc.(a) | | | 4,191 | | | | 889,498 | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
BlackRock, Inc.–Class A | | | 2,426 | | | $ | 867,440 | |
| | | | | | | | |
| | | | | | | 1,756,938 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–2.2% | | | | | | | | |
Intercontinental Exchange, Inc. | | | 7,427 | | | | 1,628,667 | |
| | | | | | | | |
| | | | | | | 3,385,605 | |
| | | | | | | | |
ENERGY–3.4% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–2.2% | | | | | | | | |
Schlumberger Ltd. | | | 19,076 | | | | 1,629,281 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–1.2% | | | | | | | | |
Antero Resources Corp.(a) | | | 6,597 | | | | 267,706 | |
Range Resources Corp. | | | 11,223 | | | | 599,870 | |
| | | | | | | | |
| | | | | | | 867,576 | |
| | | | | | | | |
| | | | | | | 2,496,857 | |
| | | | | | | | |
Total Common Stocks (cost $52,755,927) | | | | | | | 71,683,312 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–3.7% | | | | | | | | |
TIME DEPOSIT–3.7% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $2,780,621) | | $ | 2,781 | | | $ | 2,780,621 | |
| | | | | | | | |
TOTAL INVESTMENTS–100.0% (cost $55,536,548) | | | | | | | 74,463,933 | |
Other assets less liabilities–0.0% | | | | | | | 7,545 | |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 74,471,478 | |
| | | | | | | | |
(a) | | Non-income producing security. |
See notes to financial statements.
7
| | |
GROWTH PORTFOLIO | | |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value (cost $55,536,548) | | $ | 74,463,933 | |
Foreign currencies, at value (cost $15,784) | | | 14,550 | |
Receivable for capital stock sold | | | 177,522 | |
Dividends and interest receivable | | | 33,689 | |
| | | | |
Total assets | | | 74,689,694 | |
| | | | |
LIABILITIES | | | | |
Payable for capital stock redeemed | | | 83,654 | |
Advisory fee payable | | | 47,604 | |
Audit and tax fee payable | | | 37,707 | |
Administrative fee payable | | | 12,310 | |
Distribution fee payable | | | 9,919 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 26,910 | |
| | | | |
Total liabilities | | | 218,216 | |
| | | | |
NET ASSETS | | $ | 74,471,478 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 2,208 | |
Additional paid-in capital | | | 42,516,408 | |
Accumulated net realized gain on investment and foreign currency transactions | | | 13,026,711 | |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 18,926,151 | |
| | | | |
| | $ | 74,471,478 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 28,141,453 | | | | 816,506 | | | $ | 34.47 | |
B | | $ | 46,330,025 | | | | 1,391,181 | | | $ | 33.30 | |
See notes to financial statements.
8
| | |
GROWTH PORTFOLIO | | |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $905) | | $ | 597,965 | |
Affiliated issuers | | | 109 | |
Interest | | | 129 | |
Securities lending income | | | 978 | |
| | | | |
| | | 599,181 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 559,706 | |
Distribution fee—Class B | | | 118,441 | |
Transfer agency—Class A | | | 2,594 | |
Transfer agency—Class B | | | 4,481 | |
Custodian | | | 75,846 | |
Administrative | | | 48,203 | |
Audit and tax | | | 41,087 | |
Legal | | | 31,378 | |
Printing | | | 28,322 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 8,371 | |
| | | | |
Total expenses | | | 922,932 | |
| | | | |
Net investment loss | | | (323,751 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 13,446,321 | |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | (4,225,871 | ) |
Foreign currency denominated assets and liabilities | | | (1,992 | ) |
| | | | |
Net gain on investment and foreign currency transactions | | | 9,218,458 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 8,894,707 | |
| | | | |
See notes to financial statements.
9
| | |
| | |
GROWTH PORTFOLIO | | |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment loss | | $ | (323,751 | ) | | $ | (200,002 | ) |
Net realized gain on investment transactions | | | 13,446,321 | | | | 11,070,044 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | (4,227,863 | ) | | | 11,287,299 | |
| | | | | | | | |
Net increase in net assets from operations | | | 8,894,707 | | | | 22,157,341 | |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | –0 | – | | | (74,011 | ) |
Class B | | | –0 | – | | | (12,958 | ) |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (509,297 | ) | | | –0 | – |
Class B | | | (892,754 | ) | | | –0 | – |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (13,664,434 | ) | | | (13,595,024 | ) |
| | | | | | | | |
Total increase (decrease) | | | (6,171,778 | ) | | | 8,475,348 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 80,643,256 | | | | 72,167,908 | |
| | | | | | | | |
End of period (including accumulated net investment loss of ($0) and ($0), respectively) | | $ | 74,471,478 | | | $ | 80,643,256 | |
| | | | | | | | |
See notes to financial statements.
10
| | |
GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Growth Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement
11
| | |
GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 71,683,312 | | | $ | –0 | – | | $ | –0 | – | | $ | 71,683,312 | |
Short-Term Investments | | | –0 | – | | | 2,780,621 | | | | –0 | – | | | 2,780,621 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 71,683,312 | | | | 2,780,621 | | | | –0 | – | | | 74,463,933 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 71,683,312 | | | $ | 2,780,621 | | | $ | –0 | – | | $ | 74,463,933 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
12
| | |
| | AllianceBernstein Variable Products Series Fund |
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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.
13
| | |
GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE B : Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,203.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $41,565, of which $254 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C : Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D : Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 49,054,261 | | | $ | 65,234,630 | |
U.S. government securities | | | –0 | – | | | –0 | – |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 55,597,824 | |
| | | | |
Gross unrealized appreciation | | | 19,436,606 | |
Gross unrealized depreciation | | | (570,497 | ) |
| | | | |
Net unrealized appreciation | | $ | 18,866,109 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
14
| | |
| | AllianceBernstein Variable Products Series Fund |
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. As of December 31, 2014, the Portfolio had no securities out on loan. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $978 and $109 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 799 | | | $ | 2,658 | | | $ | 3,457 | | | $ | 0 | |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 34,805 | | | | 64,176 | | | | | $ | 1,126,131 | | | $ | 1,713,830 | |
Shares issued in reinvestment of dividends and distributions | | | 16,081 | | | | 2,773 | | | | | | 509,297 | | | | 74,011 | |
Shares redeemed | | | (157,609 | ) | | | (230,016 | ) | | | | | (4,981,102 | ) | | | (6,162,190 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (106,723 | ) | | | (163,067 | ) | | | | $ | (3,345,674 | ) | | $ | (4,374,349 | ) |
| | | | | | | | | | | | | | | | | | |
15
| | |
GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 40,907 | | | | 45,133 | | | | | $ | 1,287,032 | | | $ | 1,138,194 | |
Shares issued in reinvestment of dividends and distributions | | | 29,147 | | | | 500 | | | | | | 892,754 | | | | 12,958 | |
Shares redeemed | | | (407,404 | ) | | | (403,357 | ) | | | | | (12,498,546 | ) | | | (10,371,827 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (337,350 | ) | | | (357,724 | ) | | | | $ | (10,318,760 | ) | | $ | (9,220,675 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | –0 | – | | $ | 84,956 | |
Net long-term capital gains | | | 1,402,051 | | | | 2,013 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 1,402,051 | | | $ | 86,969 | |
| | | | | | | | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 542,864 | |
Undistributed capital gains | | | 12,545,124 | |
Unrealized appreciation/(depreciation) | | | 18,864,875 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 31,952,863 | |
| | | | |
(a) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to the utilization of a net operating loss to offset short-term capital gains resulted in a net decrease in accumulated net investment loss and a net decrease in accumulated net realized gain on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
17
| | |
| | |
GROWTH PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $31.03 | | | | $23.22 | | | | $20.40 | | | | $20.15 | | | | $17.56 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a) | | | (.09 | ) | | | (.03 | ) | | | .06 | | | | .03 | | | | .03 | |
Net realized and unrealized gain on investment and foreign currency transactions | | | 4.15 | | | | 7.92 | | | | 2.77 | | | | .22 | | | | 2.61 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 4.06 | | | | 7.89 | | | | 2.83 | | | | .25 | | | | 2.64 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.08 | ) | | | (.01 | ) | | | –0 | – | | | (.05 | ) |
Distributions from net realized gain on investment transactions | | | (.62 | ) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.62 | ) | | | (.08 | ) | | | (.01 | ) | | | –0 | – | | | (.05 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $34.47 | | | | $31.03 | | | | $23.22 | | | | $20.40 | | | | $20.15 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b)* | | | 13.28 | % | | | 34.01 | % | | | 13.89 | % | | | 1.24 | % | | | 15.06 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $28,141 | | | | $28,650 | | | | $25,220 | | | | $30,833 | | | | $37,198 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.08 | % | | | 1.06 | % | | | 1.06 | % | | | 1.00 | % | | | 1.00 | %+ |
Net investment income (loss) | | | (.28 | )% | | | (.10 | )% | | | .27 | % | | | .17 | % | | | .15 | %+ |
Portfolio turnover rate | | | 66 | % | | | 63 | % | | | 83 | % | | | 97 | % | | | 121 | % |
See footnote summary on page 19.
18
| | |
| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $30.08 | | | | $22.50 | | | | $19.81 | | | | $19.62 | | | | $17.10 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a) | | | (.16 | ) | | | (.09 | ) | | | .01 | | | | (.02 | ) | | | (.02 | ) |
Net realized and unrealized gain on investment and foreign currency transactions | | | 4.00 | | | | 7.68 | | | | 2.68 | | | | .21 | | | | 2.55 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 3.84 | | | | 7.59 | | | | 2.69 | | | | .19 | | | | 2.53 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.01 | ) | | | –0 | – | | | –0 | – | | | (.01 | ) |
Distributions from net realized gain on investment transactions | | | (.62 | ) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.62 | ) | | | (.01 | ) | | | –0 | – | | | –0 | – | | | (.01 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $33.30 | | | | $30.08 | | | | $22.50 | | | | $19.81 | | | | $19.62 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b)* | | | 12.96 | % | | | 33.72 | % | | | 13.58 | % | | | .97 | % | | | 14.80 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $46,330 | | | | $51,993 | | | | $46,948 | | | | $51,114 | | | | $61,325 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.33 | % | | | 1.31 | % | | | 1.31 | % | | | 1.25 | % | | | 1.25 | %+ |
Net investment income (loss) | | | (.52 | )% | | | (.35 | )% | | | .03 | % | | | (.08 | )% | | | (.10 | )%+ |
Portfolio turnover rate | | | 66 | % | | | 63 | % | | | 83 | % | | | 97 | % | | | 121 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2013, December 31, 2012, December 31, 2011 and December 31, 2010 by 0.03%, 0.06%, 0.28%, 0.07% and 0.22%, respectively. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
19
| | |
| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Growth Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
20
| | |
| | |
| | |
GROWTH PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer |
William H. Foulk, Jr.(1) | | Garry L. Moody(1) |
D. James Guzy(1) | | Earl D. Weiner(1) |
| | |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer | | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller |
Bruce K. Aronow(2), Vice President | |
Frank V. Caruso(2), Vice President | | Vincent S. Noto, Chief Compliance Officer |
John H. Fogarty(2), Vice President | | |
Emilie D. Wrapp, Secretary | | |
| | |
| | |
CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The management of, and investment decisions for, the Portfolio’s portfolio are made by the Adviser’s Growth Investment Team, with oversight by the Adviser’s Investment Advisory Members. Messrs. Bruce K. Aronow, Frank V. Caruso and John H. Fogarty are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
21
| | |
| | |
GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
22
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
23
| | |
GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in Section 2(a)(19) of the Investment Company Act of 1940, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
24
| | |
| | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Bruce K. Aronow 48 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Frank V. Caruso 58 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
John H. Fogarty
45 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABI and ABIS are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
25
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| | |
GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Growth Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In Jones, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($MIL) |
Growth Portfolio | | Growth | | 0.75% on 1st $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | $76.7 |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $54,090 (0.071% of the Portfolio’s average daily net assets) for such services.
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
26
| | |
| | AllianceBernstein Variable Products Series Fund |
Set forth below are the Portfolio’s total expense ratios for the most recently completed fiscal year:
| | | | | | |
Portfolio | | Total Expense Ratio | | Fiscal Year | |
Growth Portfolio | | Class A 1.06% | | | December 31 | |
| | Class B 1.31% | | | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($MIL) | | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Growth Portfolio | | $ | 76.7 | | | U.S. Growth Schedule 0.80% on 1st $25m 0.50% on next $25m 0.40% on next $50m 0.30% on next $100m 0.25% on the balance Minimum account size $25m | | | 0.563 | % | | | 0.750 | % |
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
27
| | |
GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser also manages The AllianceBernstein Portfolios—Growth Fund (“Growth Fund”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Growth Fund and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Growth Portfolio | | Growth Fund | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750 | % | | | 0.750 | % |
The AllianceBernstein Investment Trust Management mutual funds (“ITM”), which are offered to investors in Japan, have an “all-in” fee to compensate the Adviser for investment advisory as well as fund accounting and administrative related services. The fee schedule of the ITM mutual fund that has a somewhat similar investment style as the Portfolio is as follows:
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Portfolio | | ITM Mutual Fund | | Fee |
Growth Portfolio | | AllianceBernstein U.S. Growth Stock Fund A, B- Hedged/Unhedged | | 0.75% |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Portfolio.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.7 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.8,9
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)10 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Growth Portfolio | | | 0.750 | | | | 0.750 | | | | 5/11 | |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”).
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
8 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
9 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
10 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
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| | AllianceBernstein Variable Products Series Fund |
The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.11
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Portfolio | | Expense Ratio (%)12 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Growth Portfolio | | | 1.064 | | | | 0.846 | | | | 11/11 | | | | 0.788 | | | | 66/67 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio decreased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $122,506 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $271,765 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.13
11 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
12 | | Most recently completed fiscal year end Class A total expense ratio. |
13 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
29
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GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Be
rnstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients, including the Portfolio. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.14,15 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.16 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
14 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
15 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
16 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
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| | AllianceBernstein Variable Products Series Fund |
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio17 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)18 for the periods ended February 28, 2014.19
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Growth Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 30.76 | | | | 33.38 | | | | 32.77 | | | | 11/12 | | | | 57/89 | |
3 year | | | 14.10 | | | | 14.72 | | | | 14.66 | | | | 8/11 | | | | 50/82 | |
5 year | | | 22.36 | | | | 22.74 | | | | 22.98 | | | | 9/11 | | | | 50/77 | |
10 year | | | 6.49 | | | | 7.68 | | | | 7.69 | | | | 7/9 | | | | 54/64 | |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)20 versus its benchmarks.21 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.22
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | | Volatility (%) | | | Sharpe (%) | | |
Growth Portfolio | | | 30.76 | | | | 14.10 | | | | 22.36 | | | | 6.49 | | | | 8.72 | | | | 16.43 | | | | 0.36 | | | | 10 | |
Russell 1000 Growth Index | | | 29.14 | | | | 15.06 | | | | 24.02 | | | | 7.77 | | | | 8.63 | | | | 15.03 | | | | 0.46 | | | | 10 | |
Russell 3000 Growth Index | | | 29.76 | | | | 15.13 | | | | 24.33 | | | | 7.89 | | | | 8.68 | | | | N/A | | | | N/A | | | | N/A | |
Inception Date: September 15, 1994 | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
17 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
18 | | The Portfolio’s PG/PU is not identical to the Portfolio’s EG/EU as the criteria for including/excluding a fund from a PG/PU is somewhat different from that of an EG/EU. |
19 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
20 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
21 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
22 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
31
VPS-GTH-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | GROWTH & INCOME PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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GROWTH & INCOME PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Growth & Income Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in the equity securities of U.S. companies that AllianceBernstein L.P. (the “Adviser”) believes are undervalued, focusing on dividend-paying securities. The Adviser believes that, over time, a company’s stock price will come to reflect its intrinsic economic value. The Portfolio may invest in companies of any size and in any industry. The Portfolio also invests in high-quality securities of non-U.S. issuers.
The Portfolio may enter into derivatives transactions, such as options, futures, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds, or ETFs. The Portfolio may, at times, invest in shares of ETFs in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
INVESTMENT RESULTS
The table on page 3 shows the Portfolio’s performance compared to its benchmark, the Russell 1000 Value Index, for the one-, five- and 10-year periods ended December 31, 2014.
The Portfolio underperformed its benchmark during the annual period. Security selection was responsible for most of the deficit, although sector allocation also detracted. Stock selection in technology and industrials undercut relative performance. Stock selection in consumer staples and overweight exposure to the technology sector mitigated some of the losses.
The Portfolio did not utilize derivatives during the annual reporting period.
MARKET REVIEW AND INVESTMENT STRATEGY
U.S. equity markets advanced for much of 2014 as a brightening U.S. economic outlook boosted risk appetites. Six years after the collapse of the global financial markets, investors grew increasingly confident that the U.S. economy was strengthening, buoyed by encouraging domestic data, strong corporate earnings and a slew of mergers and acquisitions activity. The U.S. Federal Reserve (the “Fed”) ended its quantitative easing program in October after gradually reducing its monthly government bond purchases during the course of the year. However, investors remained upbeat about U.S. stocks, as the Fed’s repeated commitment to its ultra-low interest rate policy until at least mid-2015 allayed market anxiety about a premature end to the central bank’s stimulus campaign.
The Relative Value Investment Team follows a bottom-up stock picking methodology that seeks to identify companies consistent with a philosophy of relative-value investing; namely, to pursue attractively valued, well-managed companies that deploy capital wisely, giving them capacity to pay dividends and enhance the value of company shares over the long term. The Portfolio is conservatively positioned amid the current uncertainty in the global macro environment.
1
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| | |
GROWTH & INCOME PORTFOLIO | | |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged Russell 1000® Value Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Value Index represents the performance of 1,000 large-cap value companies within the U.S. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Derivatives Risk: Investments in derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Industry/Sector Risk: Investments in a particular industry or group of related industries may have more risk because market or economic factors affecting that industry could have a significant effect on the value of the Portfolio’s investments.
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
2
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GROWTH & INCOME PORTFOLIO |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Growth & Income Portfolio Class A† | | | 9.54% | | | | 15.88% | | | | 6.84% | |
Growth & Income Portfolio Class B† | | | 9.29% | | | | 15.59% | | | | 6.57% | |
Russell 1000 Value Index | | | 13.45% | | | | 15.42% | | | | 7.30% | |
* Average annual returns. | |
† Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014 by 0.11%. | |
Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.60% and 0.85% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
GROWTH & INCOME PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14
This chart illustrates the total value of an assumed $10,000 investment in the Growth & Income Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the Russell 1000 Value Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 2.
3
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GROWTH & INCOME PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each classes’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,052.30 | | | $ | 3.10 | | | | 0.60 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,022.18 | | | $ | 3.06 | | | | 0.60 | % |
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Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,050.80 | | | $ | 4.39 | | | | 0.85 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.92 | | | $ | 4.33 | | | | 0.85 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
4
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GROWTH & INCOME PORTFOLIO | | |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Berkshire Hathaway, Inc.—Class B | | $ | 44,479,235 | | | | 5.1 | % |
CVS Health Corp. | | | 36,790,516 | | | | 4.2 | |
Pfizer, Inc. | | | 35,952,396 | | | | 4.1 | |
Comcast Corp.—Class A | | | 31,685,062 | | | | 3.7 | |
Wells Fargo & Co. | | | 30,834,605 | | | | 3.6 | |
JPMorgan Chase & Co. | | | 29,916,995 | | | | 3.4 | |
UnitedHealth Group, Inc. | | | 28,372,930 | | | | 3.3 | |
Raytheon Co. | | | 23,766,031 | | | | 2.7 | |
Exxon Mobil Corp. | | | 22,433,917 | | | | 2.6 | |
Medtronic, Inc. | | | 20,202,643 | | | | 2.3 | |
| | | | | | | | |
| | $ | 304,434,330 | | | | 35.0 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 221,975,955 | | | | 25.4 | % |
Health Care | | | 140,053,650 | | | | 16.0 | |
Information Technology | | | 122,765,310 | | | | 14.0 | |
Industrials | | | 96,694,366 | | | | 11.0 | |
Consumer Discretionary | | | 73,377,062 | | | | 8.4 | |
Energy | | | 67,207,283 | | | | 7.7 | |
Consumer Staples | | | 38,325,556 | | | | 4.4 | |
Telecommunication Services | | | 16,267,979 | | | | 1.9 | |
Utilities | | | 16,012,612 | | | | 1.8 | |
Short-Term Investments | | | 82,643,494 | | | | 9.4 | |
| | | | | | | | |
Total Investments | | $ | 875,323,267 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
5
| | |
GROWTH & INCOME PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–91.1% | | | | | | | | |
| | | | | | | | |
FINANCIALS–25.5% | | | | | | | | |
BANKS–7.0% | | | | | | | | |
JPMorgan Chase & Co. | | | 478,060 | | | $ | 29,916,995 | |
Wells Fargo & Co. | | | 562,470 | | | | 30,834,605 | |
| | | | | | | | |
| | | | | | | 60,751,600 | |
| | | | | | | | |
CAPITAL MARKETS–5.4% | | | | | | | | |
BlackRock, Inc.–Class A | | | 38,240 | | | | 13,673,094 | |
Goldman Sachs Group, Inc. (The) | | | 101,130 | | | | 19,602,028 | |
State Street Corp. | | | 129,657 | | | | 10,178,075 | |
Waddell & Reed Financial, Inc.–Class A | | | 67,720 | | | | 3,373,810 | |
| | | | | | | | |
| | | | | | | 46,827,007 | |
| | | | | | | | |
CONSUMER FINANCE–1.3% | | | | | | | | |
Capital One Financial Corp. | | | 139,020 | | | | 11,476,101 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–5.1% | | | | | | | | |
Berkshire Hathaway, Inc.– Class B(a) | | | 296,232 | | | | 44,479,235 | |
| | | | | | | | |
INSURANCE–6.7% | | | | | | | | |
ACE Ltd. | | | 164,870 | | | | 18,940,266 | |
Allstate Corp. (The) | | | 134,360 | | | | 9,438,790 | |
Aon PLC | | | 72,340 | | | | 6,860,002 | |
Hartford Financial Services Group, Inc. (The) | | | 180,790 | | | | 7,537,135 | |
Validus Holdings Ltd. | | | 240,949 | | | | 10,013,840 | |
WR Berkley Corp. | | | 110,261 | | | | 5,651,979 | |
| | | | | | | | |
| | | | | | | 58,442,012 | |
| | | | | | | | |
| | | | | | | 221,975,955 | |
| | | | | | | | |
HEALTH CARE–16.1% | | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–3.2% | | | | | | | | |
Abbott Laboratories | | | 167,326 | | | | 7,533,017 | |
Medtronic, Inc. | | | 279,815 | | | | 20,202,643 | |
| | | | | | | | |
| | | | | | | 27,735,660 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–3.3% | | | | | | | | |
UnitedHealth Group, Inc. | | | 280,670 | | | | 28,372,930 | |
| | | | | | | | |
PHARMACEUTICALS–9.6% | | | | | | | | |
Bristol-Myers Squibb Co. | | | 97,778 | | | | 5,771,835 | |
Eli Lilly & Co. | | | 292,800 | | | | 20,200,272 | |
Merck & Co., Inc. | | | 250,359 | | | | 14,217,888 | |
Pfizer, Inc. | | | 1,154,170 | | | | 35,952,396 | |
Teva Pharmaceutical Industries Ltd. (Sponsored ADR) | | | 135,675 | | | | 7,802,669 | |
| | | | | | | | |
| | | | | | | 83,945,060 | |
| | | | | | | | |
| | | | | | | 140,053,650 | |
| | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–14.1% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.4% | | | | | | | | |
Cisco Systems, Inc. | | | 139,188 | | | $ | 3,871,514 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.9% | | | | | | | | |
TE Connectivity Ltd. | | | 117,760 | | | | 7,448,320 | |
| | | | | | | | |
IT SERVICES–0.9% | | | | | | | | |
Xerox Corp. | | | 551,380 | | | | 7,642,127 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–4.6% | | | | | | | | |
Altera Corp. | | | 184,860 | | | | 6,828,728 | |
Intel Corp. | | | 421,420 | | | | 15,293,332 | |
Micron Technology, Inc.(a) | | | 198,674 | | | | 6,955,577 | |
NVIDIA Corp. | | | 563,764 | | | | 11,303,468 | |
| | | | | | | | |
| | | | | | | 40,381,105 | |
| | | | | | | | |
SOFTWARE–3.5% | | | | | | | | |
Activision Blizzard, Inc. | | | 422,002 | | | | 8,503,340 | |
Check Point Software Technologies Ltd.(a) | | | 104,801 | | | | 8,234,215 | |
Microsoft Corp. | | | 289,710 | | | | 13,457,029 | |
| | | | | | | | |
| | | | | | | 30,194,584 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–3.8% | | | | | | | | |
Apple, Inc. | | | 163,115 | | | | 18,004,634 | |
EMC Corp./MA | | | 255,240 | | | | 7,590,838 | |
NetApp, Inc. | | | 184,130 | | | | 7,632,188 | |
| | | | | | | | |
| | | | | | | 33,227,660 | |
| | | | | | | | |
| | | | | | | 122,765,310 | |
| | | | | | | | |
INDUSTRIALS–11.1% | | | | | | | | |
AEROSPACE & DEFENSE–5.0% | | | | | | | | |
Boeing Co. (The) | | | 155,080 | | | | 20,157,298 | |
Raytheon Co. | | | 219,710 | | | | 23,766,031 | |
| | | | | | | | |
| | | | | | | 43,923,329 | |
| | | | | | | | |
AIRLINES–3.1% | | | | | | | | |
Copa Holdings SA–Class A | | | 177,496 | | | | 18,395,686 | |
Delta Air Lines, Inc. | | | 174,470 | | | | 8,582,179 | |
| | | | | | | | |
| | | | | | | 26,977,865 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–1.9% | | | | | | | | |
General Electric Co. | | | 650,825 | | | | 16,446,348 | |
| | | | | | | | |
MACHINERY–0.8% | | | | | | | | |
Parker-Hannifin Corp. | | | 52,689 | | | | 6,794,246 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–0.3% | | | | | | | | |
WESCO International, Inc.(a) | | | 33,494 | | | | 2,552,578 | |
| | | | | | | | |
| | | | | | | 96,694,366 | |
| | | | | | | | |
6
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
CONSUMER DISCRETIONARY–8.4% | | | | | | | | |
INTERNET & CATALOG RETAIL–1.1% | | | | | | | | |
Liberty Interactive Corp.– Class A(a) | | | 273,308 | | | $ | 8,040,722 | |
Liberty Ventures–Series A(a) | | | 38,856 | | | | 1,465,648 | |
| | | | | | | | |
| | | | | | | 9,506,370 | |
| | | | | | | | |
MEDIA–6.7% | | | | | | | | |
Comcast Corp.–Class A | | | 546,200 | | | | 31,685,062 | |
Time Warner Cable, Inc.–Class A | | | 50,939 | | | | 7,745,785 | |
Time Warner, Inc. | | | 224,110 | | | | 19,143,476 | |
| | | | | | | | |
| | | | | | | 58,574,323 | |
| | | | | | | | |
SPECIALTY RETAIL–0.6% | | | | | | | | |
PetSmart, Inc. | | | 65,150 | | | | 5,296,369 | |
| | | | | | | | |
| | | | | | | 73,377,062 | |
| | | | | | | | |
ENERGY–7.7% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–1.1% | | | | | | | | |
Cameron International Corp.(a) | | | 95,420 | | | | 4,766,229 | |
FMC Technologies, Inc.(a) | | | 107,860 | | | | 5,052,162 | |
| | | | | | | | |
| | | | | | | 9,818,391 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–6.6% | | | | | | | | |
Chevron Corp. | | | 59,958 | | | | 6,726,089 | |
ConocoPhillips | | | 98,770 | | | | 6,821,056 | |
Exxon Mobil Corp. | | | 242,660 | | | | 22,433,917 | |
Hess Corp. | | | 90,990 | | | | 6,716,882 | |
Marathon Oil Corp. | | | 277,890 | | | | 7,861,508 | |
Occidental Petroleum Corp. | | | 84,722 | | | | 6,829,440 | |
| | | | | | | | |
| | | | | | | 57,388,892 | |
| | | | | | | | |
| | | | | | | 67,207,283 | |
| | | | | | | | |
CONSUMER STAPLES–4.4% | | | | | | | | |
FOOD & STAPLES RETAILING–4.2% | | | | | | | | |
CVS Health Corp. | | | 382,001 | | | | 36,790,516 | |
| | | | | | | | |
FOOD PRODUCTS–0.2% | | | | | | | | |
Archer-Daniels-Midland Co. | | | 29,520 | | | | 1,535,040 | |
| | | | | | | | |
| | | | | | | 38,325,556 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–1.9% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–1.9% | | | | | | | | |
Verizon Communications, Inc. | | | 347,755 | | | | 16,267,979 | |
| | | | | | | | |
UTILITIES–1.9% | | | | | | | | |
ELECTRIC UTILITIES–0.9% | | | | | | | | |
Great Plains Energy, Inc. | | | 279,320 | | | | 7,935,481 | |
| | | | | | | | |
MULTI-UTILITIES–1.0% | | | | | | | | |
Wisconsin Energy Corp.(b) | | | 153,150 | | | | 8,077,131 | |
| | | | | | | | |
| | | | | | | 16,012,612 | |
| | | | | | | | |
Total Common Stocks (cost $594,219,474) | | | | | | | 792,679,773 | |
| | | | | | | | |
| | | | | | | | | | |
Company | | | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | |
SHORT-TERM INVESTMENTS–9.5% | | | | | | | | | | |
TIME DEPOSIT–9.5% | | | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $82,643,494) | | U.S | | . $ | 82,643 | | | $ | 82,643,494 | |
| | | | | | | | | | |
| | | | Shares | | | | |
TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL FOR SECURITIES LOANED–100.6% (cost $676,862,968) | | | | | | | | | 875,323,267 | |
| | | | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.0% | | | | | | | | | | |
INVESTMENT COMPANIES–1.0% | | | | | | | | | | |
AB Exchange Reserves– Class I, 0.07%(c)(d) (cost $8,423,250) | | | | | 8,423,250 | | | | 8,423,250 | |
| | | | | | | | | | |
TOTAL INVESTMENTS–101.6% (cost $685,286,218) | | | | | | | | | 883,746,517 | |
Other assets less liabilities–(1.6)% | | | | | | | | | (14,169,385 | ) |
| | | | | | | | | | |
NET ASSETS–100.0% | | | | | | | | $ | 869,577,132 | |
| | | | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
(d) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
Glossary:
ADR—American Depositary Receipt
See notes to financial statements.
7
| | |
GROWTH & INCOME PORTFOLIO |
STATEMENT OF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $676,862,968) | | $ | 875,323,267 | (a) |
Affiliated issuers (cost $8,423,250—investment of cash collateral for securities loaned) | | | 8,423,250 | |
Dividends and interest receivable | | | 809,914 | |
Receivable for capital stock sold | | | 138,768 | |
| | | | |
Total assets | | | 884,695,199 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 8,423,250 | |
Payable for investment securities purchased | | | 5,183,945 | |
Payable for capital stock redeemed | | | 796,501 | |
Advisory fee payable | | | 407,249 | |
Distribution fee payable | | | 149,333 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 145,367 | |
| | | | |
Total liabilities | | | 15,118,067 | |
| | | | |
NET ASSETS | | $ | 869,577,132 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 29,206 | |
Additional paid-in capital | | | 676,794,784 | |
Undistributed net investment income | | | 10,200,000 | |
Accumulated net realized loss on investment transactions | | | (15,907,157 | ) |
Net unrealized appreciation on investments | | | 198,460,299 | |
| | | | |
| | $ | 869,577,132 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 168,135,435 | | | | 5,596,734 | | | $ | 30.04 | |
B | | $ | 701,441,697 | | | | 23,609,006 | | | $ | 29.71 | |
(a) | | Includes securities on loan with a value of $8,077,131 (see Note E). |
See notes to financial statements.
8
| | |
GROWTH & INCOME PORTFOLIO | | |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $34,654) | | $ | 17,084,426 | |
Affiliated issuers | | | 625 | |
Interest | | | 6,132 | |
Securities lending income | | | 3,893 | |
| | | | |
| | | 17,095,076 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 4,707,511 | |
Distribution fee—Class B | | | 1,730,726 | |
Transfer agency—Class A | | | 2,070 | |
Transfer agency—Class B | | | 8,777 | |
Custodian | | | 154,247 | |
Printing | | | 112,331 | |
Legal | | | 57,473 | |
Administrative | | | 48,204 | |
Audit and tax | | | 41,708 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 23,888 | |
| | | | |
Total expenses | | | 6,891,438 | |
| | | | |
Net investment income | | | 10,203,638 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 78,058,883 | |
Net change in unrealized appreciation/depreciation of investments | | | (12,349,510 | ) |
| | | | |
Net gain on investment transactions | | | 65,709,373 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 75,913,011 | |
| | | | |
See notes to financial statements.
9
| | |
| | |
GROWTH & INCOME PORTFOLIO |
STATEMENT OF CHANGES IN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 10,203,638 | | | $ | 9,990,731 | |
Net realized gain on investment transactions | | | 78,058,883 | | | | 175,745,634 | |
Net change in unrealized appreciation/depreciation of investments | | | (12,349,510 | ) | | | 80,022,635 | |
| | | | | | | | |
Net increase in net assets from operations | | | 75,913,011 | | | | 265,759,000 | |
DIVIDENDS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (2,268,517 | ) | | | (1,985,126 | ) |
Class B | | | (7,666,587 | ) | | | (9,529,113 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (69,811,950 | ) | | | (276,433,549 | ) |
| | | | | | | | |
Total decrease | | | (3,834,043 | ) | | | (22,188,788 | ) |
NET ASSETS | | | | | | | | |
Beginning of period | | | 873,411,175 | | | | 895,599,963 | |
| | | | | | | | |
End of period (including undistributed net investment income of $10,200,000 and $9,928,588, respectively) | | $ | 869,577,132 | | | $ | 873,411,175 | |
| | | | | | | | |
See notes to financial statements.
10
| | |
GROWTH & INCOME PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Growth & Income Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement
11
| | |
GROWTH & INCOME PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 792,679,773 | | | $ | –0 | – | | $ | –0 | – | | $ | 792,679,773 | |
Short-Term Investments | | | –0 | – | | | 82,643,494 | | | | –0 | – | | | 82,643,494 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 8,423,250 | | | | –0 | – | | | –0 | – | | | 8,423,250 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 801,103,023 | | | | 82,643,494 | | | | –0 | – | | | 883,746,517 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 801,103,023 | | | $ | 82,643,494 | | | $ | –0 | – | | $ | 883,746,517 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
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| | AllianceBernstein Variable Products Series Fund |
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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.
13
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GROWTH & INCOME PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE B: Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,204.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $595,695, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 407,224,437 | | | $ | 503,974,040 | |
U.S. government securities | | | –0 | – | | | –0 | – |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 686,630,552 | |
| | | | |
Gross unrealized appreciation | | | 212,665,362 | |
Gross unrealized depreciation | | | (15,549,397 | ) |
| | | | |
Net unrealized appreciation | | $ | 197,115,965 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
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| | AllianceBernstein Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $8,077,131 and had received cash collateral which has been invested into AB Exchange Reserves of $8,423,250. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $3,893 and $625 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 0 | | | $ | 42,087 | | | $ | 33,664 | | | $ | 8,423 | |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 792,608 | | | | 850,754 | | | | | $ | 22,691,868 | | | $ | 20,712,220 | |
Shares issued in reinvestment of dividends | | | 79,653 | | | | 83,584 | | | | | | 2,268,517 | | | | 1,985,126 | |
Shares redeemed | | | (1,180,764 | ) | | | (1,322,227 | ) | | | | | (33,448,306 | ) | | | (31,796,790 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (308,503 | ) | | | (387,889 | ) | | | | $ | (8,487,921 | ) | | $ | (9,099,444 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,584,088 | | | | 2,948,344 | | | | | $ | 44,665,440 | | | $ | 71,020,261 | |
Shares issued in reinvestment of dividends | | | 271,961 | | | | 404,977 | | | | | | 7,666,587 | | | | 9,529,113 | |
Shares redeemed | | | (4,045,067 | ) | | | (14,546,299 | ) | | | | | (113,656,056 | ) | | | (347,883,479 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (2,189,018 | ) | | | (11,192,978 | ) | | | | $ | (61,324,029 | ) | | $ | (267,334,105 | ) |
| | | | | | | | | | | | | | | | | | |
15
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GROWTH & INCOME PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 9,935,104 | | | $ | 11,514,239 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 9,935,104 | | | $ | 11,514,239 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 10,200,000 | |
Accumulated capital and other losses | | | (14,562,823 | )(a) |
Unrealized appreciation/(depreciation) | | | 197,115,965 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 192,753,142 | |
| | | | |
(a) | | As of December 31, 2014, the Portfolio had a net capital loss carryforward of $14,562,823. During the fiscal year, the Portfolio utilized $78,078,754 of capital loss carryforwards to offset current year net realized gains. |
(b) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
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| | AllianceBernstein Variable Products Series Fund |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
As of December 31, 2014, the Portfolio had a net capital loss carryforward of $14,562,823 which will expire in 2017.
During the current fiscal year, permanent differences primarily due to the tax treatment of class action proceeds resulted in a net increase in undistributed net investment income and a net increase in accumulated net realized loss on investment transactions. This reclassification had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
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GROWTH & INCOME PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $27.80 | | | | $20.88 | | | | $18.05 | | | | $17.19 | | | | $15.20 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .40 | | | | .33 | | | | .29 | | | | .27 | | | | .20 | |
Net realized and unrealized gain on investment transactions | | | 2.23 | | | | 6.92 | | | | 2.86 | | | | .83 | | | | 1.79 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 2.63 | | | | 7.25 | | | | 3.15 | | | | 1.10 | | | | 1.99 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.39 | ) | | | (.33 | ) | | | (.32 | ) | | | (.24 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $30.04 | | | | $27.80 | | | | $20.88 | | | | $18.05 | | | | $17.19 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b)* | | | 9.54 | % | | | 34.96 | % | | | 17.53 | % | | | 6.32 | % | | | 13.09 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $168,135 | | | | $164,154 | | | | $131,402 | | | | $138,731 | | | | $201,521 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .60 | % | | | .60 | % | | | .60 | % | | | .60 | % | | | .63 | %+ |
Net investment income | | | 1.39 | % | | | 1.35 | % | | | 1.48 | % | | | 1.52 | % | | | 1.30 | %+ |
Portfolio turnover rate | | | 51 | % | | | 63 | % | | | 80 | % | | | 76 | % | | | 66 | % |
See footnote summary on page 19.
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| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $27.49 | | | | $20.66 | | | | $17.86 | | | | $17.01 | | | | $15.08 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .32 | | | | .27 | | | | .24 | | | | .23 | | | | .16 | |
Net realized and unrealized gain on investment transactions | | | 2.22 | | | | 6.83 | | | | 2.83 | | | | .81 | | | | 1.77 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 2.54 | | | | 7.10 | | | | 3.07 | | | | 1.04 | | | | 1.93 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.32 | ) | | | (.27 | ) | | | (.27 | ) | | | (.19 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $29.71 | | | | $27.49 | | | | $20.66 | | | | $17.86 | | | | $17.01 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b)* | | | 9.29 | % | | | 34.59 | % | | | 17.24 | % | | | 6.07 | % | | | 12.80 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $701,442 | | | | $709,257 | | | | $764,198 | | | | $735,514 | | | | $805,714 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .85 | % | | | .85 | % | | | .85 | % | | | .85 | % | | | .88 | %+ |
Net investment income | | | 1.14 | % | | | 1.11 | % | | | 1.23 | % | | | 1.28 | % | | | 1.05 | %+ |
Portfolio turnover rate. | | | 51 | % | | | 63 | % | | | 80 | % | | | 76 | % | | | 66 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2013, December 31, 2012, December 31, 2011 and December 31, 2010 by 0.11%, 0.08%, 0.19%, 0.13% and 0.27%, respectively. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
19
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| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Growth & Income Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Growth & Income Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Growth & Income Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
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2014 FEDERAL TAX INFORMATION | | |
(unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 100% of dividends paid qualify for the dividends received deduction.
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GROWTH & INCOME PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
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BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
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OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Frank V. Caruso(2), Vice President Emilie D. Wrapp, Secretary | | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
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CUSTODIANAND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
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DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by Mr. Frank V. Caruso, a member of the Adviser’s Relative Value Investment Team. |
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GROWTH & INCOME PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
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NAME, ADDRESS,* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | | | |
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Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
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DISINTERESTED DIRECTORS | | | | | | |
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Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2006, and interim CEO 1999-2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
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John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001-2008. | | | 116 | | | None |
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GROWTH & INCOME PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
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NAME, ADDRESS,* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
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Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
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William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
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D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
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| | AllianceBernstein Variable Products Series Fund |
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NAME, ADDRESS,* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
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Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
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Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
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GROWTH & INCOME PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
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NAME, ADDRESS,* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
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DISINTERESTED DIRECTORS (continued) | | | | | | |
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Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
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| | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
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NAME, ADDRESS,* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
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Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
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Frank V. Caruso 58 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
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Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
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Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
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Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
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Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABIS and ABI are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
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GROWTH & INCOME PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Growth & Income Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
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Portfolio | | Category | | Advisory Fee Based on% of Average Daily Net Assets | | Net Assets 3/31/14 ($MIL) | |
Growth & Income Portfolio | | Value | | 0.55% on first $2.5 billion | | $ | 860.8 | |
| | | | 0.45% on next $2.5 billion | | | | |
| | | | 0.40% on the balance | | | | |
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
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| | AllianceBernstein Variable Products Series Fund |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $54,103 (0.006% of the Portfolio’s average daily net assets) for such services.
Set forth below are the Portfolio’s total expense ratios for the most recently completed fiscal year:
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Portfolio | | Total Expense Ratio | | Fiscal Year |
Growth & Income Portfolio | | Class A 0.60% | | December 31 |
| | Class B 0.85% | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
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Portfolio | | Net Assets 3/31/14 ($MIL) | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Growth & Income | | $860.8 | | U.S. Growth & Income | | | 0.283 | % | | | 0.550 | % |
Portfolio | | | | 0.65% on first $25m | | | | | | | | |
| | | | 0.50% on next $25m | | | | | | | | |
| | | | 0.40% on next $50m | | | | | | | | |
| | | | 0.30% on next $100m | | | | | | | | |
| | | | 0.25% on the balance | | | | | | | | |
| | | | Minimum account size $25m | | | | | |
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
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GROWTH & INCOME PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser also manages AllianceBernstein Growth & Income Fund, Inc. (“Growth & Income Fund, Inc.”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Growth & Income Fund, Inc. and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
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Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Growth & Income Portfolio | | Growth & Income Fund, Inc. | | 0.55% on first $2.5 billion | | | 0.550 | % | | | 0.550 | % |
| | | | 0.45% on next $2.5 billion | | | | | | | | |
| | | | 0.40% on the balance | | | | | | | | |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Portfolio.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.7 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group( “EG”) and the Portfolio’s contractual management fee ranking.8,9
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)10 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Growth & Income Portfolio | | | 0.550 | | | | 0.713 | | | | 2/11 | |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.11
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)12 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Growth & Income | | | 0.603 | | | | 0.770 | | | | 2/11 | | | | 0.796 | | | | 4/29 | |
Portfolio | | | | | | | | | | | | | | | | | | | | |
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
8 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
9 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
10 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
11 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
12 | | Most recently completed fiscal year end Class A total expense ratio. |
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| | AllianceBernstein Variable Products Series Fund |
Based on this analysis, the Portfolio has equally favorable rankings on a contractual management fee basis and on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $1,799,452 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $4,276,871 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.13
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and pay commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
13 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
31
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GROWTH & INCOME PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.14,15 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.16 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio17 relative to its Lipper Performance Group( “PG”) and Lipper Performance Universe (“PU”)18 for the periods ended February 28, 2014.19
14 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
15 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
16 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
17 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
18 | | The Portfolio’s PG is identical to the Portfolio’s EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
19 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
32
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | PU Rank |
Growth & Income Portfolio | | | | | | | | | | | | | | | | |
1 year | | | 26.09 | | | | 26.85 | | | | 24.16 | | | 8/11 | | 28/74 |
3 year | | | 16.30 | | | | 14.20 | | | | 11.67 | | | 2/10 | | 7/66 |
5 year | | | 22.01 | | | | 22.28 | | | | 22.01 | | | 6/10 | | 32/63 |
10 year | | | 6.54 | | | | 7.55 | | | | 7.72 | | | 7/9 | | 28/30 |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)20 versus its benchmarks.21 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.22
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | | Volatility (%) | | | Sharpe (%) | | |
Growth & Income Portfolio | | | 26.10 | | | | 16.30 | | | | 22.01 | | | | 6.54 | | | | 9.64 | | | | 15.11 | | | | 0.39 | | | | 10 | |
Russell 1000 Value Index | | | 23.44 | | | | 14.05 | | | | 23.18 | | | | 7.24 | | | | 10.99 | | | | 15.52 | | | | 0.42 | | | | 10 | |
Inception Date: February 25,1994 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
20 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
21 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
22 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
33
VPS-GI-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | INTERMEDIATE BOND PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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INTERMEDIATE BOND PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Intermediate Bond Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to generate income and price appreciation without assuming what AllianceBernstein L.P. (the “Adviser”) considers undue risk. The Portfolio invests, under normal circumstances, at least 80% of its net assets in fixed-income securities. The Portfolio expects to invest in readily marketable fixed-income securities with a range of maturities from short- to long-term and relatively attractive yields that do not involve undue risk of loss of capital. The Portfolio expects to invest in fixed-income securities with a dollar-weighted average maturity of between three to ten years and an average duration of three to six years. The Portfolio may invest up to 25% of its net assets in below investment grade bonds (commonly known as “junk bonds”). The Portfolio may use leverage for investment purposes.
The Portfolio may invest without limit in U.S. dollar-denominated foreign fixed-income securities and may invest up to 25% of its assets in non-U.S. dollar-denominated foreign fixed-income securities. These investments may include, in each case, developed and emerging market debt securities.
The Portfolio may invest in mortgage-related and other asset-backed securities, loan participations, inflation-protected securities, structured securities, variable, floating and inverse floating-rate instruments, and preferred stock, and may use other investment techniques. The Portfolio intends, among other things, to enter into transactions such as reverse repurchase agreements and dollar rolls. The Portfolio may enter into, without limit, derivatives transactions, such as options, futures, forwards and swaps.
INVESTMENT RESULTS
The table on page 4 shows the Portfolio’s performance compared to its benchmark, the Barclays U.S. Aggregate Bond Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio outperformed the benchmark for the annual period. Security selection and active currency exposure were the primary contributors to outperformance. Sector allocation also contributed, while overall yield curve positioning detracted. Exposure to non-agency mortgages was positive; overweights to commercial mortgage-backed securities and asset-backed securities contributed modestly. Conversely, exposure to inflation-linked securities detracted. Security selection in investment-grade corporates provided a positive effect for the annual period; security selection in banking was the main contributor. Security selection within mortgages detracted. An overall short duration position, as well as an underweight on the long end of the yield curve, detracted from performance. The Portfolio’s overweight to the U.S. dollar against short positions in a basket of developed-market currencies was a notable contributor.
During the annual period, the Portfolio utilized derivatives in the form of Treasury futures and interest rate swaps to manage duration and yield curve positioning. Currency forwards were used to manage the Portfolio’s currency exposure. Credit default swaps were utilized for hedging and investment purposes, which had an immaterial impact on performance.
MARKET REVIEW AND INVESTMENT STRATEGY
Bond markets turned more volatile in 2014, as growth trends and monetary policies in the world’s biggest economies headed in different directions. In the fourth quarter, a plunge in oil prices rattled credit markets, pressured emerging-market currencies and added to deflationary pressures in Europe and Japan. The U.S. Treasury yield curve flattened, and the 10-year U.S. Treasury yield declined by about 0.32% over the quarter, leaving it roughly 0.86% below where it began the year. Corporate bond spreads widened in the U.S. but narrowed slightly in Europe; most credit sectors underperformed developed-market government debt. Meanwhile, currency volatility remained high as monetary policies worldwide diverged and the U.S. dollar strengthened. Emerging-market currencies were particularly volatile as lower oil prices weighed on the finances of large exporters.
1
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INTERMEDIATE BOND PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged Barclays U.S. Aggregate Bond Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Barclays U.S. Aggregate Bond Index represents the performance of securities within the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, asset-backed securities, and commercial mortgage-backed securities. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Duration Risk: Duration is a measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security.
Below Investment Grade Security Risk: Investments in fixed-income securities with lower ratings (“junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations. These securities may be subject to greater price volatility due to such factors as specific corporate developments, interest rate sensitivity, negative perceptions of the junk bond market generally and less secondary market liquidity.
Inflation Risk: This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the value of the Portfolio’s assets can decline as can the value of the Portfolio’s distributions. This risk is significantly greater if the Portfolio invests a significant portion of its assets in fixed-income securities with longer maturities.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Prepayment Risk: The value of mortgage-related or other asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early payments of principal on some of these securities may occur during periods of falling mortgage interest rates and expose the Portfolio to a lower rate of return upon reinvestment of principal. Early payments associated with these securities cause these securities to experience significantly greater price and yield volatility than is experienced by traditional fixed-income securities. During periods of rising interest rates, a reduction in prepayments may
(Disclosures, Risks and Note about Historical Performance continued on next page)
2
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| | AllianceBernstein Variable Products Series Fund |
increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, the Portfolio may not be able to realize the rate of return it expected.
Leverage Risk: To the extent the Portfolio uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Portfolio’s investments.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Management Risk: The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
3
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INTERMEDIATE BOND PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
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THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Intermediate Bond Portfolio Class A | | | 6.48% | | | | 5.17% | | | | 4.72% | |
Intermediate Bond Portfolio Class B | | | 6.22% | | | | 4.92% | | | | 4.47% | |
Barclays U.S. Aggregate Bond Index | | | 5.97% | | | | 4.45% | | | | 4.71% | |
* Average annual returns. | | | | | | | | | | | | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 0.77% and 1.02% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
INTERMEDIATE BOND PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Intermediate Bond Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the Barclays U.S. Aggregate Bond Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 2-3.
4
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INTERMEDIATE BOND PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees of other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees of other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,017.70 | | | $ | 4.73 | | | | 0.93 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.52 | | | $ | 4.74 | | | | 0.93 | % |
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Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,016.40 | | | $ | 5.95 | | | | 1.17 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.31 | | | $ | 5.96 | | | | 1.17 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
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INTERMEDIATE BOND PORTFOLIO | | |
SECURITY TYPE BREAKDOWN* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
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SECURITY TYPE | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Governments—Treasuries | | $ | 17,408,339 | | | | 20.6 | % |
Corporates—Investment Grade | | | 17,388,003 | | | | 20.6 | |
Mortgage Pass-Throughs | | | 15,291,592 | | | | 18.1 | |
Asset-Backed Securities | | | 11,116,514 | | | | 13.2 | |
Commercial Mortgage-Backed Securities | | | 7,123,433 | | | | 8.4 | |
Corporates—Non-Investment Grade | | | 4,447,864 | | | | 5.3 | |
Collateralized Mortgage Obligations | | | 3,144,739 | | | | 3.7 | |
Inflation-Linked Securities | | | 2,425,340 | | | | 2.9 | |
Agencies | | | 2,035,766 | | | | 2.4 | |
Quasi-Sovereigns | | | 1,184,456 | | | | 1.4 | |
Governments—Sovereign Agencies | | | 405,360 | | | | 0.5 | |
Preferred Stocks | | | 325,360 | | | | 0.4 | |
Local Governments—Municipal Bonds | | | 307,000 | | | | 0.4 | |
Other† | | | 101,000 | | | | 0.1 | |
Short-Term Investments | | | 1,682,875 | | | | 2.0 | |
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Total Investments | | $ | 84,387,641 | | | | 100.0 | % |
* | | The Portfolio’s security type breakdown is expressed as a percentage of total investments and may vary over time. The Portfolio also enters into derivatives transactions, which may be used for hedging purposes (see “Portfolio of Investments” section of the report for additional details). |
† | | “Other” represents less than 0.1% weightings in the following security types: Emerging Markets—Corporate Bonds and Warrants. |
6
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INTERMEDIATE BOND PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
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| | Principal Amount (000) | | | U.S. $ Value | |
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GOVERNMENTS– TREASURIES–22.8% | | | | | | | | | |
BRAZIL–0.5% | | | | | | | | | | | | |
Brazil Notas do Tesouro Nacional Series F 10.00%, 1/01/17 | | | BRL | | | | 1,030 | | | $ | 368,893 | |
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MEXICO–0.8% | | | | | | | | | | | | |
Mexican Bonos Series M 10 7.75%, 12/14/17 | | | MXN | | | | 8,069 | | | | 597,267 | |
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NEW ZEALAND–1.3% | | | | | | | | | | | | |
New Zealand Government Bond Series 319 5.00%, 3/15/19(a) | | | NZD | | | | 1,170 | | | | 963,512 | |
| | | | | | | | | | | | |
UNITED KINGDOM–0.7% | | | | | | | | | | | | |
United Kingdom Gilt 3.75%, 9/07/21(a) | | | GBP | | | | 320 | | | | 572,956 | |
| | | | | | | | | | | | |
UNITED STATES–19.5% | | | | | | | | | | | | |
U.S. Treasury Bonds 3.00%, 11/15/44 | | | U.S.$ | | | | 303 | | | | 318,855 | |
3.125%, 8/15/44 | | | | | | | 485 | | | | 522,133 | |
3.625%, 8/15/43–2/15/44 | | | | | | | 564 | | | | 663,029 | |
4.50%, 2/15/36 | | | | | | | 654 | | | | 872,857 | |
4.625%, 2/15/40 | | | | | | | 2,560 | | | | 3,480,000 | |
U.S. Treasury Notes 0.375%, 3/31/16 | | | | | | | 943 | | | | 942,853 | |
1.50%, 8/31/18–11/30/19 | | | | | | | 1,147 | | | | 1,142,169 | |
1.625%, 6/30/19 | | | | | | | 637 | | | | 638,592 | |
1.75%, 9/30/19 | | | | | | | 1,632 | | | | 1,641,461 | |
2.25%, 11/15/24 | | | | | | | 171 | | | | 172,048 | |
2.375%, 8/15/24 | | | | | | | 583 | | | | 594,202 | |
2.50%, 8/15/23–5/15/24 | | | | | | | 2,766 | | | | 2,849,831 | |
2.75%, 11/15/23–2/15/24 | | | | | | | 1,014 | | | | 1,067,681 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 14,905,711 | |
| | | | | | | | | | | | |
Total Governments–Treasuries (cost $16,337,420) | | | | | | | | | | | 17,408,339 | |
| | | | | | | | | | | | |
CORPORATES–INVESTMENT GRADE–22.8% | | | | | | | | | |
INDUSTRIAL–14.7% | | | | | | | | | | | | |
BASIC–2.0% | | | | | | | | | | | | |
Basell Finance Co. BV 8.10%, 3/15/27(a) | | | | | | | 85 | | | | 113,905 | |
Cia Minera Milpo SAA 4.625%, 3/28/23(a) | | | | | | | 260 | | | | 255,172 | |
Dow Chemical Co. (The) 8.55%, 5/15/19 | | | | | | | 86 | | | | 106,919 | |
Glencore Funding LLC 4.125%, 5/30/23(a) | | | | | | | 58 | | | | 56,594 | |
International Paper Co. 3.65%, 6/15/24 | | | | | | | 49 | | | | 48,965 | |
4.75%, 2/15/22 | | | | | | | 65 | | | | 70,914 | |
LyondellBasell Industries NV 5.75%, 4/15/24 | | | | | | | 200 | | | | 228,739 | |
Minsur SA 6.25%, 2/07/24(a) | | | | | | | 210 | | | | 226,741 | |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Sociedad Quimica y Minera de Chile SA 3.625%, 4/03/23(a) | | | U.S.$ | | | | 260 | | | $ | 249,630 | |
Vale SA 5.625%, 9/11/42 | | | | | | | 29 | | | | 27,011 | |
Yamana Gold, Inc. 4.95%, 7/15/24 | | | | | | | 166 | | | | 162,012 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,546,602 | |
| | | | | | | | | | | | |
CAPITAL GOODS–0.0% | | | | | | | | | | | | |
Owens Corning 6.50%, 12/01/16(b) | | | | | | | 10 | | | | 10,895 | |
| | | | | | | | | | | | |
COMMUNICATIONS–MEDIA–2.2% | | | | | | | | | |
21st Century Fox America, Inc. 4.00%, 10/01/23 | | | | | | | 64 | | | | 67,954 | |
4.50%, 2/15/21 | | | | | | | 300 | | | | 328,376 | |
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc. 3.50%, 3/01/16 | | | | | | | 95 | | | | 97,478 | |
3.80%, 3/15/22 | | | | | | | 57 | | | | 57,990 | |
4.45%, 4/01/24 | | | | | | | 81 | | | | 84,751 | |
5.00%, 3/01/21 | | | | | | | 175 | | | | 190,837 | |
NBCUniversal Enterprise, Inc. 5.25%, 3/19/21(a)(c) | | | | | | | 128 | | | | 132,800 | |
Omnicom Group, Inc. 3.625%, 5/01/22 | | | | | | | 87 | | | | 89,314 | |
TCI Communications, Inc. 7.875%, 2/15/26 | | | | | | | 115 | | | | 160,403 | |
Time Warner Cable, Inc. 4.125%, 2/15/21 | | | | | | | 200 | | | | 214,038 | |
Time Warner, Inc. 7.625%, 4/15/31 | | | | | | | 69 | | | | 96,195 | |
Viacom, Inc. 3.875%, 4/01/24 | | | | | | | 68 | | | | 68,261 | |
5.625%, 9/15/19 | | | | | | | 60 | | | | 67,384 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,655,781 | |
| | | | | | | | | | | | |
COMMUNICATIONS–TELECOMMUNICATIONS–1.9% | | | | | | | | | |
American Tower Corp. 5.05%, 9/01/20 | | | | | | | 260 | | | | 282,085 | |
Deutsche Telekom International Finance BV 4.875%, 3/06/42(a) | | | | | | | 320 | | | | 342,058 | |
Rogers Communications, Inc. 4.00%, 6/06/22 | | | CAD | | | | 27 | | | | 24,529 | |
SBA Tower Trust 2.898%, 10/15/19(a) | | | U.S.$ | | | | 147 | | | | 147,385 | |
Telefonica Emisiones SAU 5.462%, 2/16/21 | | | | | | | 120 | | | | 133,799 | |
Verizon Communications, Inc. 3.50%, 11/01/24 | | | | | | | 258 | | | | 253,485 | |
3.85%, 11/01/42 | | | | | | | 89 | | | | 79,342 | |
6.55%, 9/15/43 | | | | | | | 165 | | | | 211,390 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,474,073 | |
| | | | | | | | | | | | |
7
| | |
INTERMEDIATE BOND PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–AUTOMOTIVE–0.7% | | | | | | | | | |
Ford Motor Credit Co. LLC 5.875%, 8/02/21 | | | U.S.$ | | | | 455 | | | $ | 526,794 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–RETAILERS– 0.3% | | | | | | | | | |
Walgreens Boots Alliance, Inc./old 3.80%, 11/18/24 | | | | | | | 195 | | | | 198,881 | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–2.2% | | | | | | | | | | | | |
Actavis Funding SCS 3.85%, 6/15/24 | | | | | | | 54 | | | | 54,276 | |
Altria Group, Inc. 2.625%, 1/14/20 | | | | | | | 195 | | | | 195,566 | |
Bayer US Finance LLC 3.375%, 10/08/24(a) | | | | | | | 200 | | | | 203,514 | |
Becton Dickinson and Co. 3.734%, 12/15/24 | | | | | | | 85 | | | | 87,514 | |
Grupo Bimbo SAB de CV 3.875%, 6/27/24(a) | | | | | | | 201 | | | | 201,790 | |
Kroger Co. (The) 3.40%, 4/15/22 | | | | | | | 194 | | | | 197,495 | |
Medtronic, Inc. 3.50%, 3/15/25(a) | | | | | | | 195 | | | | 199,479 | |
Perrigo Finance PLC 3.50%, 12/15/21 | | | | | | | 200 | | | | 202,333 | |
Reynolds American, Inc. 3.25%, 11/01/22 | | | | | | | 127 | | | | 123,703 | |
Thermo Fisher Scientific, Inc. 4.15%, 2/01/24 | | | | | | | 78 | | | | 82,258 | |
Tyson Foods, Inc. 2.65%, 8/15/19 | | | | | | | 39 | | | | 39,355 | |
3.95%, 8/15/24 | | | | | | | 123 | | | | 127,148 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,714,431 | |
| | | | | | | | | | | | |
ENERGY–3.4% | | | | | | | | | |
Diamond Offshore Drilling, Inc. 4.875%, 11/01/43 | | | | | | | 68 | | | | 57,930 | |
Encana Corp. 3.90%, 11/15/21 | | | | | | | 45 | | | | 44,349 | |
Energy Transfer Partners LP 7.50%, 7/01/38 | | | | | | | 244 | | | | 302,837 | |
Enterprise Products Operating LLC 5.20%, 9/01/20 | | | | | | | 55 | | | | 60,659 | |
Kinder Morgan Energy Partners LP 3.95%, 9/01/22 | | | | | | | 321 | | | | 318,291 | |
4.15%, 3/01/22 | | | | | | | 89 | | | | 89,688 | |
Nabors Industries, Inc. 5.10%, 9/15/23 | | | | | | | 158 | | | | 150,014 | |
Noble Energy, Inc. 3.90%, 11/15/24 | | | | | | | 107 | | | | 105,753 | |
8.25%, 3/01/19 | | | | | | | 238 | | | | 285,338 | |
Noble Holding International Ltd. 3.95%, 3/15/22 | | | | | | | 92 | | | | 80,597 | |
4.90%, 8/01/20 | | | | | | | 32 | | | | 29,984 | |
| | | | | | | | | | | | |
Sunoco Logistics Partners Operations LP 5.30%, 4/01/44 | | | U.S.$ | | | | 145 | | | $ | 146,153 | |
TransCanada PipeLines Ltd. 6.35%, 5/15/67 | | | | | | | 235 | | | | 227,950 | |
Transocean, Inc. 6.375%, 12/15/21 | | | | | | | 1 | | | | 923 | |
6.50%, 11/15/20 | | | | | | | 185 | | | | 174,449 | |
Valero Energy Corp. 6.125%, 2/01/20 | | | | | | | 177 | | | | 200,737 | |
Weatherford International Ltd./Bermuda 9.625%, 3/01/19 | | | | | | | 190 | | | | 225,355 | |
Williams Partners LP 4.125%, 11/15/20 | | | | | | | 97 | | | | 99,376 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,600,383 | |
| | | | | | | | | | | | |
OTHER INDUSTRIAL–0.3% | | | | | | | | | |
Hutchison Whampoa International 14 Ltd. 1.625%, 10/31/17(a) | | | | | | | 200 | | | | 198,352 | |
| | | | | | | | | | | | |
TECHNOLOGY–1.3% | | | | | | | | | |
Hewlett-Packard Co. 4.65%, 12/09/21 | | | | | | | 107 | | | | 114,572 | |
KLA-Tencor Corp. 4.65%, 11/01/24 | | | | | | | 195 | | | | 201,873 | |
Motorola Solutions, Inc. 3.50%, 3/01/23 | | | | | | | 165 | | | | 162,418 | |
7.50%, 5/15/25 | | | | | | | 25 | | | | 30,770 | |
Seagate HDD Cayman 4.75%, 1/01/25(a) | | | | | | | 75 | | | | 77,262 | |
Telefonaktiebolaget LM Ericsson 4.125%, 5/15/22 | | | | | | | 43 | | | | 44,978 | |
Tencent Holdings Ltd. 3.375%, 5/02/19(a) | | | | | | | 205 | | | | 208,370 | |
Total System Services, Inc. 2.375%, 6/01/18 | | | | | | | 74 | | | | 73,366 | |
3.75%, 6/01/23 | | | | | | | 69 | | | | 67,614 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 981,223 | |
| | | | | | | | | | | | |
TRANSPORTATION–AIRLINES–0.1% | | | | | | | | | |
Southwest Airlines Co. 5.75%, 12/15/16 | | | | | | | 75 | | | | 81,034 | |
| | | | | | | | | | | | |
TRANSPORTATION–SERVICES–0.3% | | | | | | | | | |
Ryder System, Inc. 5.85%, 11/01/16 | | | | | | | 116 | | | | 125,266 | |
7.20%, 9/01/15 | | | | | | | 108 | | | | 112,547 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 237,813 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 11,226,262 | |
| | | | | | | | | | | | |
FINANCIAL INSTITUTIONS–6.1% | | | | | | | | | |
BANKING–3.4% | | | | | | | | | | | | |
Compass Bank 5.50%, 4/01/20 | | | | | | | 250 | | | | 272,030 | |
Credit Suisse AG 6.50%, 8/08/23(a) | | | | | | | 240 | | | | 261,138 | |
Goldman Sachs Group, Inc. (The) 3.85%, 7/08/24 | | | | | | | 210 | | | | 215,376 | |
Series D 6.00%, 6/15/20 | | | | | | | 395 | | | | 456,631 | |
8
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Macquarie Group Ltd. 4.875%, 8/10/17(a) | | | U.S.$ | | | | 232 | | | $ | 248,075 | |
Morgan Stanley 5.625%, 9/23/19 | | | | | | | 143 | | | | 161,418 | |
Murray Street Investment Trust I 4.647%, 3/09/17 | | | | | | | 27 | | | | 28,496 | |
Nationwide Building Society 6.25%, 2/25/20(a) | | | | | | | 230 | | | | 269,795 | |
Rabobank Capital Funding Trust III 5.254%, 10/21/16(a)(c) | | | | | | | 90 | | | | 93,420 | |
Standard Chartered PLC 4.00%, 7/12/22(a) | | | | | | | 265 | | | | 269,436 | |
UBS AG/Stamford CT 7.625%, 8/17/22 | | | | | | | 250 | | | | 294,339 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,570,154 | |
| | | | | | | | | | | | |
FINANCE–0.2% | | | | | | | | | | | | |
Aviation Capital Group Corp. 7.125%, 10/15/20(a) | | | | | | | 155 | | | | 177,683 | |
| | | | | | | | | | | | |
INSURANCE–1.7% | | | | | | | | | | | | |
American International Group, Inc. 4.875%, 6/01/22 | | | | | | | 75 | | | | 84,251 | |
6.40%, 12/15/20 | | | | | | | 215 | | | | 256,381 | |
Dai-ichi Life Insurance Co., Ltd. (The) 5.10%, 10/28/24(a)(c) | | | | | | | 200 | | | | 208,000 | |
Hartford Financial Services Group, Inc. (The) 5.50%, 3/30/20 | | | | | | | 200 | | | | 226,018 | |
Lincoln National Corp. 8.75%, 7/01/19 | | | | | | | 113 | | | | 141,197 | |
MetLife, Inc. 10.75%, 8/01/39 | | | | | | | 85 | | | | 138,125 | |
Nationwide Mutual Insurance Co. 9.375%, 8/15/39(a) | | | | | | | 55 | | | | 87,145 | |
Prudential Financial, Inc. 5.625%, 6/15/43 | | | | | | | 185 | | | | 189,125 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,330,242 | |
| | | | | | | | | | | | |
REITS–0.8% | | | | | | | | | | | | |
HCP, Inc. 5.375%, 2/01/21 | | | | | | | 179 | | | | 199,891 | |
Health Care REIT, Inc. 5.25%, 1/15/22 | | | | | | | 183 | | | | 203,346 | |
Trust F/1401 5.25%, 12/15/24(a) | | | | | | | 200 | | | | 206,020 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 609,257 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,687,336 | |
| | | | | | | | | | | | |
NON CORPORATE SECTORS–1.0% | | | | | |
AGENCIES–NOT GOVERNMENT GUARANTEED–1.0% | | | | | | | | | | | | |
CNOOC Finance 2013 Ltd. 3.00%, 5/09/23 | | | | | | | 260 | | | | 246,066 | |
| | | | | | | | | | | | |
OCP SA 5.625%, 4/25/24(a) | | | U.S.$ | | | | 205 | | | $ | 215,250 | |
Petrobras International Finance Co. SA 5.75%, 1/20/20 | | | | | | | 297 | | | | 286,816 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 748,132 | |
| | | | | | | | | | | | |
UTILITY–1.0% | | | | | | | | | | | | |
ELECTRIC–0.6% | | | | | | | | | | | | |
Berkshire Hathaway Energy Co. 6.125%, 4/01/36 | | | | | | | 170 | | | | 213,577 | |
CMS Energy Corp. 5.05%, 3/15/22 | | | | | | | 37 | | | | 41,481 | |
Constellation Energy Group, Inc. 5.15%, 12/01/20 | | | | | | | 64 | | | | 70,861 | |
Exelon Generation Co. LLC 4.25%, 6/15/22 | | | | | | | 78 | | | | 81,056 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 406,975 | |
| | | | | | | | | | | | |
NATURAL GAS–0.4% | | | | | | | | | | | | |
Talent Yield Investments Ltd. 4.50%, 4/25/22(a) | | | | | | | 305 | | | | 319,298 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 726,273 | |
| | | | | | | | | | | | |
Total Corporates–Investment Grade (cost $16,535,699) | | | | | | | | | | | 17,388,003 | |
| | | | | | | | | | | | |
MORTGAGE PASS-THROUGHS–20.1% | | | | | | | | | |
AGENCY FIXED RATE 30-YEAR–18.3% | | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. Gold 4.50%, 9/01/44 | | | | | | | 352 | | | | 386,030 | |
Series 2005 5.50%, 1/01/35 | | | | | | | 181 | | | | 204,371 | |
Series 2007 5.50%, 7/01/35 | | | | | | | 50 | | | | 55,899 | |
Federal National Mortgage Association 3.00%, 6/01/43-7/01/43 | | | | | | | 1,407 | | | | 1,425,425 | |
3.50%, 1/01/45, TBA | | | | | | | 3,731 | | | | 3,889,277 | |
4.00%, 1/01/45, TBA | | | | | | | 3,972 | | | | 4,239,252 | |
4.50%, 11/01/43-4/01/44 | | | | | | | 702 | | | | 770,859 | |
4.50%, 1/25/45, TBA | | | | | | | 1,297 | | | | 1,407,853 | |
Series 2003 5.50%, 4/01/33-7/01/33 | | | | | | | 167 | | | | 187,710 | |
Series 2004 5.50%, 4/01/34-11/01/34 | | | | | | | 151 | | | | 169,708 | |
Series 2005 5.50%, 2/01/35 | | | | | | | 184 | | | | 206,760 | |
Series 2007 4.50%, 8/01/37 | | | | | | | 49 | | | | 53,673 | |
Series 2014 4.50%, 2/01/44 | | | | | | | 154 | | | | 167,073 | |
Government National Mortgage Association 3.50%, 1/01/45, TBA | | | | | | | 771 | | | | 809,309 | |
Series 1994 9.00%, 9/15/24 | | | | | | | 1 | | | | 1,455 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 13,974,654 | |
| | | | | | | | | | | | |
9
| | |
INTERMEDIATE BOND PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
AGENCY FIXED RATE 15-YEAR–1.8% | | | | | | | | | | | | |
Federal National Mortgage Association 3.00%, 1/01/29, TBA | | | U.S.$ | | | | 1,267 | | | $ | 1,316,938 | |
| | | | | | | | | | | | |
Total Mortgage Pass-Throughs (cost $15,063,714) | | | | | | | | | | | 15,291,592 | |
| | | | | | | | | | | | |
ASSET-BACKED SECURITIES–14.6% | | | | | | | | | | | | |
AUTOS–FIXED RATE–8.5% | | | | | | | | | | | | |
Ally Master Owner Trust Series 2013-1, Class A2 1.00%, 2/15/18 | | | | | | | 260 | | | | 260,320 | |
Series 2014-1, Class A2 1.29%, 1/15/19 | | | | | | | 252 | | | | 251,449 | |
AmeriCredit Automobile Receivables Trust Series 2011-3, Class D 4.04%, 7/10/17 | | | | | | | 200 | | | | 203,593 | |
Series 2012-3, Class A3 0.96%, 1/09/17 | | | | | | | 86 | | | | 86,110 | |
Series 2013-3, Class A3 0.92%, 4/09/18 | | | | | | | 335 | | | | 335,216 | |
Series 2013-4, Class A3 0.96%, 4/09/18 | | | | | | | 130 | | | | 130,167 | |
Series 2013-5, Class A2A 0.65%, 3/08/17 | | | | | | | 39 | | | | 38,738 | |
ARI Fleet Lease Trust Series 2014-A, Class A2 0.81%, 11/15/22(a) | | | | | | | 93 | | | | 93,024 | |
Avis Budget Rental Car Funding AESOP LLC Series 2013-2A, Class A 2.97%, 2/20/20(a) | | | | | | | 288 | | | | 295,899 | |
Series 2014-1A, Class A 2.46%, 7/20/20(a) | | | | | | | 149 | | | | 148,908 | |
California Republic Auto Receivables Trust Series 2014-2, Class A4 1.57%, 12/16/19 | | | | | | | 122 | | | | 121,648 | |
Capital Auto Receivables Asset Trust Series 2013-3, Class A2 1.04%, 11/21/16 | | | | | | | 275 | | | | 275,635 | |
Series 2014-1, Class B 2.22%, 1/22/19 | | | | | | | 60 | | | | 60,527 | |
Capital Auto Receivables Asset Trust/Ally Series 2013-1, Class A2 0.62%, 7/20/16 | | | | | | | 69 | | | | 69,138 | |
CarMax Auto Owner Trust Series 2012-1, Class A3 0.89%, 9/15/16 | | | | | | | 35 | | | | 34,695 | |
Chrysler Capital Auto Receivables Trust Series 2014-BA, Class A2 0.69%, 9/15/17(a) | | | | | | | 279 | | | | 278,955 | |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
CPS Auto Receivables Trust Series 2013-B, Class A 1.82%, 9/15/20(a) | | | U.S.$ | | | | 162 | | | $ | 161,737 | |
Series 2014-B, Class A 1.11%, 11/15/18(a) | | | | | | | 84 | | | | 83,772 | |
Enterprise Fleet Financing LLC Series 2014-2, Class A2 1.05%, 3/20/20(a) | | | | | | | 200 | | | | 199,745 | |
Exeter Automobile Receivables Trust Series 2012-2A, Class A 1.30%, 6/15/17(a) | | | | | | | 26 | | | | 25,819 | |
Series 2013-1A, Class A 1.29%, 10/16/17(a) | | | | | | | 36 | | | | 36,387 | |
Series 2014-1A, Class A 1.29%, 5/15/18(a) | | | | | | | 59 | | | | 59,359 | |
Series 2014-2A, Class A 1.06%, 8/15/18(a) | | | | | | | 57 | | | | 57,045 | |
Fifth Third Auto Trust Series 2014-3, Class A4 1.47%, 5/17/21 | | | | | | | 165 | | | | 164,012 | |
Flagship Credit Auto Trust Series 2013-1, Class A 1.32%, 4/16/18(a) | | | | | | | 43 | | | | 42,646 | |
Ford Auto Securitization Trust Series 2013-R1A, Class A2 1.676%, 9/15/16(a) | | | CAD | | | | 92 | | | | 79,190 | |
Series 2014-R2A, Class A1 1.353%, 3/15/16(a) | | | | | | | 41 | | | | 35,402 | |
Ford Credit Auto Lease Trust Series 2014-B, Class A3 0.89%, 9/15/17 | | | U.S.$ | | | | 144 | | | | 143,648 | |
Ford Credit Auto Owner Trust Series 2012-D, Class B 1.01%, 5/15/18 | | | | | | | 100 | | | | 99,340 | |
Series 2014-2, Class A 2.31%, 4/15/26(a) | | | | | | | 157 | | | | 157,668 | |
Ford Credit Floorplan Master Owner Trust Series 2013-1, Class A1 0.85%, 1/15/18 | | | | | | | 136 | | | | 136,041 | |
Series 2014-1, Class A1 1.20%, 2/15/19 | | | | | | | 201 | | | | 200,349 | |
Harley-Davidson Motorcycle Trust Series 2012-1, Class A3 0.68%, 4/15/17 | | | | | | | 61 | | | | 61,010 | |
Hertz Vehicle Financing LLC Series 2013-1A, Class A1 1.12%, 8/25/17(a) | | | | | | | 175 | | | | 174,601 | |
Series 2013-1A, Class A2 1.83%, 8/25/19(a) | | | | | | | 485 | | | | 478,280 | |
Mercedes-Benz Auto Lease Trust Series 2013-A, Class A3 0.59%, 2/15/16 | | | | | | | 107 | | | | 106,851 | |
Series 2014-A, Class A2A 0.48%, 6/15/16 | | | | | | | 216 | | | | 215,692 | |
10
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Mercedes-Benz Master Owner Trust Series 2012-AA, Class A 0.79%, 11/15/17(a) | | | U.S.$ | | | | 373 | | | $ | 372,988 | |
Santander Drive Auto Receivables Trust Series 2013-4, Class A3 1.11%, 12/15/17 | | | | | | | 261 | | | | 261,243 | |
Series 2013-5, Class A2A | | | | | | | | | | | | |
0.64%, 4/17/17 | | | | | | | 28 | | | | 27,745 | |
Series 2014-2, Class A3 0.80%, 4/16/18 | | | | | | | 205 | | | | 204,462 | |
Volkswagen Auto Loan Enhanced Trust Series 2014-1, Class A3 0.91%, 10/22/18 | | | | | | | 232 | | | | 231,017 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,500,071 | |
| | | | | | | | | | | | |
CREDIT CARDS–FIXED RATE–1.6% | | | | | | | | | |
American Express Credit Account Master Trust Series 2014-2, Class A 1.26%, 1/15/20 | | | | | | | 161 | | | | 160,863 | |
Barclays Dryrock Issuance Trust Series 2014-3, Class A 2.41%, 7/15/22 | | | | | | | 320 | | | | 322,998 | |
Discover Card Master Trust Series 2012-A3, Class A3 0.86%, 11/15/17 | | | | | | | 300 | | | | 300,450 | |
Synchrony Credit Card Master Note Trust Series 2012-2, Class A 2.22%, 1/15/22 | | | | | | | 232 | | | | 231,826 | |
World Financial Network Credit Card Master Trust Series 2012-B, Class A 1.76%, 5/17/21 | | | | | | | 190 | | | | 191,067 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,207,204 | |
| | | | | | | | | | | | |
AUTOS–FLOATING RATE–1.6% | | | | | | | | | |
GE Dealer Floorplan Master Note Trust Series 2012-3, Class A 0.656%, 6/20/17(b) | | | | | | | 485 | | | | 485,209 | |
Series 2012-4, Class A 0.606%, 10/20/17(b) | | | | | | | 158 | | | | 157,987 | |
Hertz Fleet Lease Funding LP Series 2013-3, Class A 0.711%, 12/10/27(a)(b) | | | | | | | 167 | | | | 167,202 | |
Navistar Financial Dealer Note Master Trust Series 2014-1, Class A 0.92%, 10/25/19(a)(b) | | | | | | | 197 | | | | 197,000 | |
NCF Dealer Floorplan Master Trust Series 2014-1A, Class A 1.665%, 10/20/20(a)(b) | | | | | | | 197 | | | | 196,674 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,204,072 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
CREDIT CARDS–FLOATING RATE–1.2% | | | | | | | | | |
Barclays Dryrock Issuance Trust Series 2014-2, Class A 0.501%, 3/16/20(b) | | | U.S.$ | | | | 205 | | | $ | 205,000 | |
Cabela’s Credit Card Master Note Trust Series 2014-1, Class A 0.511%, 3/16/20(b) | | | | | | | 205 | | | | 204,943 | |
Gracechurch Card Funding PLC Series 2012-1A, Class A1 0.861%, 2/15/17(a)(b) | | | | | | | 320 | | | | 320,126 | |
World Financial Network Credit Card Master Trust Series 2014-A, Class A 0.541%, 12/15/19(b) | | | | | | | 185 | | | | 185,337 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 915,406 | |
| | | | | | | | | | | | |
OTHER ABS–FIXED RATE–1.0% | | | | | | | | | |
CIT Equipment Collateral Series 2013-VT1, Class A3 1.13%, 7/20/20(a) | | | | | | | 213 | | | | 213,292 | |
Series 2014-VT1, Class A2 0.86%, 5/22/17(a) | | | | | | | 196 | | | | 195,988 | |
CNH Capital Canada Receivables Trust Series 2014-1A, Class A1 1.388%, 3/15/17(a) | | | CAD | | | | 84 | | | | 72,122 | |
CNH Equipment Trust Series 2014-B, Class A4 1.61%, 5/17/21 | | | U.S.$ | | | | 101 | | | | 100,384 | |
GE Equipment Small Ticket LLC Series 2014-1A, Class A2 0.59%, 8/24/16(a) | | | | | | | 193 | | | | 192,565 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 774,351 | |
| | | | | | | | | | | | |
OTHER ABS–FLOATING RATE–0.3% | | | | | | | | | |
GE Dealer Floorplan Master Note Trust Series 2014-1, Class A 0.546%, 7/20/19(b) | | | | | | | 240 | | | | 239,768 | |
| | | | | | | | | | | | |
HOME EQUITY LOANS–FLOATING RATE–0.3% | | | | | | | | | |
Asset Backed Funding Certificates Series 2003-WF1, Class A2 1.295%, 12/25/32(b) | | | | | | | 52 | | | | 49,761 | |
GSAA Trust Series 2006-5, Class 2A3 0.44%, 3/25/36(b) | | | | | | | 192 | | | | 132,085 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 181,846 | |
| | | | | | | | | | | | |
HOME EQUITY LOANS–FIXED RATE–0.1% | | | | | | | | | |
Credit-Based Asset Servicing and Securitization LLC Series 2003-CB1, Class AF 3.95%, 1/25/33 | | | | | | | 93 | | | | 93,796 | |
| | | | | | | | | | | | |
Total Asset-Backed Securities (cost $11,141,883) | | | | | | | | | | | 11,116,514 | |
| | | | | | | | | | | | |
11
| | |
INTERMEDIATE BOND PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
COMMERCIAL MORTGAGE-BACKED SECURITIES–9.3% | | | | | | | | | |
NON-AGENCY FIXED RATE CMBS–7.9% | | | | | | | | | |
Banc of America Commercial Mortgage Trust Series 2007-4, Class A1A 5.774%, 2/10/51 | | | U.S.$ | | | | 340 | | | $ | 370,563 | |
Series 2007-5, Class AM | | | | | | | | | | | | |
5.772%, 2/10/51 | | | | | | | 78 | | | | 82,047 | |
Bear Stearns Commercial Mortgage Securities Trust Series 2006-PW13, Class AJ 5.611%, 9/11/41 | | | | | | | 108 | | | | 110,956 | |
BHMS Mortgage Trust Series 2014-ATLS, Class AFX 3.601%, 7/05/33(a) | | | | | | | 200 | | | | 201,838 | |
CGRBS Commercial Mortgage Trust Series 2013-VN05, Class A 3.369%, 3/13/35(a) | | | | | | | 260 | | | | 267,001 | |
Citigroup Commercial Mortgage Trust Series 2006-C4, Class A1A 5.771%, 3/15/49 | | | | | | | 129 | | | | 134,862 | |
COBALT CMBS Commercial Mortgage Trust Series 2007-C3, Class A4 5.766%, 5/15/46 | | | | | | | 169 | | | | 183,561 | |
Commercial Mortgage Pass-Through Certificates Series 2007-GG9, Class A4 5.444%, 3/10/39 | | | | | | | 506 | | | | 540,219 | |
Series 2013-SFS, Class A1 1.873%, 4/12/35(a) | | | | | | | 112 | | | | 109,836 | |
Credit Suisse Commercial Mortgage Trust Series 2007-C3, Class AM 5.702%, 6/15/39 | | | | | | | 95 | | | | 99,191 | |
Extended Stay America Trust Series 2013-ESH7, Class A17 2.295%, 12/05/31(a) | | | | | | | 180 | | | | 177,753 | |
GS Mortgage Securities Corp. II Series 2013-KING, Class A 2.706%, 12/10/27(a) | | | | | | | 267 | | | | 269,826 | |
GS Mortgage Securities Trust Series 2013-G1, Class A2 3.557%, 4/10/31(a) | | | | | | | 136 | | | | 136,656 | |
JPMorgan Chase Commercial Mortgage Securities Trust Series 2010-C2, Class A1 2.749%, 11/15/43(a) | | | | | | | 174 | | | | 176,514 | |
Merrill Lynch Mortgage Trust Series 2006-C2, Class A1A 5.739%, 8/12/43 | | | | | | | 157 | | | | 166,283 | |
Merrill Lynch/Countrywide Commercial Mortgage Trust Series 2006-4, Class A1A 5.166%, 12/12/49 | | | | | | | 589 | | | | 620,772 | |
| | | | | | | | | | | | |
ML-CFC Commercial Mortgage Trust Series 2007-9, Class A4 5.70%, 9/12/49 | | | U.S.$ | | | | 1,105 | | | $ | 1,195,027 | |
Motel 6 Trust Series 2012-MTL6, Class A2 1.948%, 10/05/25(a) | | | | | | | 280 | | | | 279,104 | |
UBS-Barclays Commercial Mortgage Trust Series 2012-C3, Class A4 3.091%, 8/10/49 | | | | | | | 60 | | | | 60,372 | |
Series 2012-C4, Class A5 2.85%, 12/10/45 | | | | | | | 112 | | | | 111,675 | |
Wachovia Bank Commercial Mortgage Trust Series 2006-C23, Class A5 5.416%, 1/15/45 | | | | | | | 380 | | | | 393,679 | |
WFRBS Commercial Mortgage Trust Series 2013-C14, Class A5 3.337%, 6/15/46 | | | | | | | 233 | | | | 239,877 | |
Series 2014-C20, Class A2 3.036%, 5/15/47 | | | | | | | 125 | | | | 129,312 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,056,924 | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING RATE CMBS–1.4% | | | | | | | | | |
Commercial Mortgage Pass-Through Certificates Series 2014-KYO, Class A 1.059%, 6/11/27(a)(b) | | | | | | | 102 | | | | 101,392 | |
Series 2014-SAVA, Class A 1.311%, 6/15/34(a)(b) | | | | | | | 100 | | | | 99,786 | |
Extended Stay America Trust Series 2013-ESFL, Class A2FL 0.857%, 12/05/31(a)(b) | | | | | | | 140 | | | | 139,543 | |
JP Morgan Chase Commercial Mortgage Securities Trust Series 2014-INN, Class A 1.081%, 6/15/29(a)(b) | | | | | | | 201 | | | | 200,811 | |
PFP III Ltd. Series 2014-1, Class A 1.331%, 6/14/31(a)(b) | | | | | | | 231 | | | | 230,247 | |
Resource Capital Corp., Ltd. Series 2014-CRE2, Class A 1.212%, 4/15/32(a)(b) | | | | | | | 100 | | | | 99,003 | |
Starwood Retail Property Trust Series 2014-STAR, Class A 1.381%, 11/15/27(a)(b) | | | | | | | 196 | | | | 195,727 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,066,509 | |
| | | | | | | | | | | | |
Total Commercial Mortgage-Backed Securities (cost $7,122,648) | | | | | | | | | | | 7,123,433 | |
| | | | | | | | | | | | |
12
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
CORPORATES–NON-INVESTMENT GRADE–5.8% | | | | | | | | | |
INDUSTRIAL–2.9% | | | | | | | | | |
BASIC–0.0% | | | | | | | | | |
Novelis, Inc. 8.375%, 12/15/17 | | | U.S.$ | | | | 18 | | | $ | 18,675 | |
| | | | | | | | | | | | |
COMMUNICATIONS– MEDIA–1.0% | | | | | | | | | |
Arqiva Broadcast Finance PLC 9.50%, 3/31/20(a) | | | GBP | | | | 100 | | | | 171,056 | |
CSC Holdings LLC 8.625%, 2/15/19 | | | U.S.$ | | | | 29 | | | | 33,713 | |
Intelsat Jackson Holdings SA 7.25%, 10/15/20 | | | | | | | 70 | | | | 73,938 | |
Numericable-SFR 5.375%, 5/15/22(a) | | | EUR | | | | 120 | | | | 149,853 | |
Quebecor Media, Inc. 5.75%, 1/15/23 | | | U.S.$ | | | | 75 | | | | 76,687 | |
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH 5.50%, 1/15/23(a) | | | | | | | 200 | | | | 209,000 | |
Univision Communications, Inc. 6.875%, 5/15/19(a) | | | | | | | 61 | | | | 63,516 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 777,763 | |
| | | | | | | | | | | | |
COMMUNICATIONS– TELECOMMUNICATIONS–0.2% | | | | | | | | | |
Sprint Corp. 7.875%, 9/15/23 | | | | | | | 100 | | | | 98,720 | |
Windstream Corp. 6.375%, 8/01/23 | | | | | | | 80 | | | | 74,800 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 173,520 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–AUTOMOTIVE–0.2% | | | | | | | | | |
General Motors Co. 3.50%, 10/02/18 | | | | | | | 80 | | | | 81,600 | |
Goodyear Tire & Rubber Co. (The) 8.25%, 8/15/20 | | | | | | | 36 | | | | 38,160 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 119,760 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–OTHER–0.1% | | | | | | | | | |
KB Home 4.75%, 5/15/19 | | | | | | | 63 | | | | 62,055 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–RETAILERS–0.1% | | | | | | | | | | | | |
CST Brands, Inc. 5.00%, 5/01/23 | | | | | | | 75 | | | | 75,750 | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.3% | | | | | | | | | |
CHS/Community Health Systems, Inc. 5.125%, 8/15/18 | | | | | | | 33 | | | | 34,155 | |
First Quality Finance Co., Inc. 4.625%, 5/15/21(a) | | | | | | | 85 | | | | 77,775 | |
Voyage Care Bondco PLC 6.50%, 8/01/18(a) | | | GBP | | | | 100 | | | | 158,860 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 270,790 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
ENERGY–0.5% | | | | | | | | | | | | |
Access Midstream Partners LP/ACMP Finance Corp. 4.875%, 3/15/24 | | | U.S.$ | | | | 78 | | | $ | 79,170 | |
California Resources Corp. 5.50%, 9/15/21(a) | | | | | | | 53 | | | | 45,315 | |
ONEOK, Inc. 4.25%, 2/01/22 | | | | | | | 203 | | | | 185,796 | |
Paragon Offshore PLC 7.25%, 8/15/24(a) | | | | | | | 81 | | | | 48,600 | |
SM Energy Co. 6.50%, 1/01/23 | | | | | | | 9 | | | | 8,640 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 367,521 | |
| | | | | | | | | | | | |
SERVICES–0.1% | | | | | | | | | | | | |
Sabre GLBL, Inc. 8.50%, 5/15/19(a) | | | | | | | 70 | | | | 74,900 | |
| | | | | | | | | | | | |
TECHNOLOGY–0.1% | | | | | | | | | | | | |
Audatex North America, Inc. 6.00%, 6/15/21(a) | | | | | | | 73 | | | | 75,190 | |
| | | | | | | | | | | | |
TRANSPORTATION– AIRLINES–0.1% | | | | | | | | | | | | |
Air Canada 6.75%, 10/01/19(a) | | | | | | | 70 | | | | 72,800 | |
| | | | | | | | | | | | |
TRANSPORTATION– SERVICES–0.2% | | | | | | | | | | | | |
Avis Budget Car Rental LLC/Avis Budget Finance, Inc. 5.50%, 4/01/23 | | | | | | | 77 | | | | 78,540 | |
Hertz Corp. (The) 6.75%, 4/15/19 | | | | | | | 70 | | | | 72,100 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 150,640 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,239,364 | |
| | | | | | | | | | | | |
FINANCIAL INSTITUTIONS – 2.6% | | | | | | | | | | | | |
BANKING–2.4% | | | | | | | | | | | | |
ABN AMRO Bank NV 4.31%, 3/10/16(c) | | | EUR | | | | 42 | | | | 51,457 | |
Bank of America Corp. Series Z 6.50%, 10/23/24(c) | | | U.S.$ | | | | 79 | | | | 80,414 | |
Bank of Ireland 2.08%, 9/22/15(b)(d) | | | CAD | | | | 110 | | | | 91,840 | |
Barclays Bank PLC | | | | | | | | | | | | |
6.86%, 6/15/32(a)(c) | | | U.S.$ | | | | 29 | | | | 32,190 | |
7.625%, 11/21/22 | | | | | | | 200 | | | | 218,685 | |
7.75%, 4/10/23 | | | | | | | 200 | | | | 218,000 | |
BNP Paribas SA 5.186%, 6/29/15(a)(c) | | | | | | | 62 | | | | 62,000 | |
Credit Suisse Group AG 7.50%, 12/11/23(a)(c) | | | | | | | 200 | | | | 207,000 | |
HBOS Capital Funding LP 4.939%, 5/23/16(c) | | | EUR | | | | 82 | | | | 99,125 | |
Intesa Sanpaolo SpA 5.017%, 6/26/24(a) | | | U.S.$ | | | | 202 | | | | 196,044 | |
Lloyds Banking Group PLC 7.50%, 6/27/24(c) | | | | | | | 200 | | | | 203,500 | |
Royal Bank of Scotland PLC (The) 9.50%, 3/16/22(a) | | | | | | | 39 | | | | 44,320 | |
13
| | |
INTERMEDIATE BOND PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Skandinaviska Enskilda Banken AB 5.471%, 3/23/15(a)(c) | | | U.S.$ | | | | 100 | | | $ | 100,500 | |
Societe Generale SA 4.196%, 1/26/15(c) | | | EUR | | | | 48 | | | | 58,082 | |
UniCredit Luxembourg Finance SA 6.00%, 10/31/17(a) | | | U.S.$ | | | | 190 | | | | 202,410 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,865,567 | |
| | | | | | | | | | | | |
FINANCE–0.1% | | | | | | | | | | | | |
International Lease Finance Corp. 5.875%, 4/01/19 | | | | | | | 55 | | | | 59,263 | |
| | | | | | | | | | | | |
INSURANCE–0.1% | | | | | | | | | | | | |
American Equity Investment Life Holding Co. 6.625%, 7/15/21 | | | | | | | 70 | | | | 74,200 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,999,030 | |
| | | | | | | | | | | | |
UTILITY–0.3% | | | | | | | | | | | | |
ELECTRIC–0.3% | | | | | | | | | | | | |
AES Corp./VA 7.375%, 7/01/21 | | | | | | | 70 | | | | 79,100 | |
NRG Energy, Inc. 6.25%, 5/01/24(a) | | | | | | | 54 | | | | 54,945 | |
7.875%, 5/15/21 | | | | | | | 70 | | | | 75,425 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 209,470 | |
| | | | | | | | | | | | |
Total Corporates–Non-Investment Grade (cost $4,513,643) | | | | | | | | | | | 4,447,864 | |
| | | | | | | | | | | | |
COLLATERALIZED MORTGAGE OBLIGATIONS–4.1% | | | | | | | | | | | | |
NON-AGENCY FIXED RATE–1.7% | | | | | | | | | | | | |
Alternative Loan Trust | | | | | | | | | | | | |
Series 2005-20CB, Class 3A6 5.50%, 7/25/35 | | | | | | | 36 | | | | 33,750 | |
Series 2005-57CB, Class 4A3 5.50%, 12/25/35 | | | | | | | 87 | | | | 79,921 | |
Series 2006-24CB, Class A16 5.75%, 6/25/36 | | | | | | | 125 | | | | 110,367 | |
Series 2006-28CB, Class A14 6.25%, 10/25/36 | | | | | | | 85 | | | | 73,319 | |
Series 2006-9T1, Class A1 5.75%, 5/25/36 | | | | | | | 54 | | | | 45,654 | |
Series 2006-J1, Class 1A13 5.50%, 2/25/36 | | | | | | | 81 | | | | 72,597 | |
Chase Mortgage Finance Trust | | | | | | | | | | | | |
Series 2007-S5, Class 1A17 6.00%, 7/25/37 | | | | | | | 43 | | | | 37,310 | |
Citigroup Mortgage Loan Trust, Inc. | | | | | | | | | | | | |
Series 2005-2, Class 1A4 2.552%, 5/25/35 | | | | | | | 104 | | | | 99,722 | |
Countrywide Home Loan Mortgage Pass-Through Trust | | | | | | | | | | | | |
Series 2006-10, Class 1A8 6.00%, 5/25/36 | | | | | | | 73 | | | | 66,863 | |
Series 2006-13, Class 1A18 6.25%, 9/25/36 | | | | | | | 110 | | | | 102,519 | |
| | | | | | | | | | | | |
Series 2006-13, Class 1A19 6.25%, 9/25/36 | | | U.S.$ | | | | 40 | | | $ | 36,967 | |
Series 2007-HYB2, Class 3A1 2.581%, 2/25/47 | | | | | | | 149 | | | | 123,256 | |
First Horizon Alternative Mortgage Securities Trust | | | | | | | | | | | | |
Series 2006-FA3, Class A9 6.00%, 7/25/36 | | | | | | | 127 | | | | 106,427 | |
JP Morgan Alternative Loan Trust | | | | | | | | | | | | |
Series 2006-A3, Class 2A1 2.64%, 7/25/36 | | | | | | | 231 | | | | 179,166 | |
JP Morgan Mortgage Trust | | | | | | | | | | | | |
Series 2007-S3, Class 1A8 6.00%, 8/25/37 | | | | | | | 58 | | | | 53,072 | |
Wells Fargo Mortgage Backed Securities Trust | | | | | | | | | | | | |
Series 2007-8, Class 2A5 5.75%, 7/25/37 | | | | | | | 51 | | | | 50,094 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,271,004 | |
| | | | | | | | | | | | |
GSE RISK SHARE FLOATING RATE–1.5% | | | | | | | | | | | | |
Federal Home Loan Mortgage Corp., Structured Agency Credit Risk Debt Notes | | | | | | | | | | | | |
Series 2014-DN3, Class M2 2.57%, 8/25/24(b) | | | | | | | 335 | | | | 333,755 | |
Series 2014-HQ3, Class M2 2.82%, 10/25/24(b) | | | | | | | 250 | | | | 247,839 | |
Federal National Mortgage Association Connecticut Avenue Securities | | | | | | | | | | | | |
Series 2014-C03, Class 1M1 1.37%, 7/25/24(b) | | | | | | | 72 | | | | 71,251 | |
Series 2014-C04, Class 1M2 5.055%, 11/25/24(b) | | | | | | | 234 | | | | 235,411 | |
Structured Agency Credit Risk Debt Notes | | | | | | | | | | | | |
Series 2014-DN2, Class M3 3.77%, 4/25/24(b) | | | | | | | 250 | | | | 230,199 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,118,455 | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING RATE–0.8% | | | | | | | | | | | | |
Deutsche Alt-A Securities Mortgage Loan Trust | | | | | | | | | | | | |
Series 2006-AR4, Class A2 0.36%, 12/25/36(b) | | | | | | | 207 | | | | 125,549 | |
HomeBanc Mortgage Trust | | | | | | | | | | | | |
Series 2005-1, Class A1 0.42%, 3/25/35(b) | | | | | | | 104 | | | | 92,742 | |
IndyMac Index Mortgage Loan Trust | | | | | | | | | | | | |
Series 2006-AR15, Class A1 0.29%, 7/25/36(b) | | | | | | | 155 | | | | 118,501 | |
Series 2006-AR27, Class 2A2 0.37%, 10/25/36(b) | | | | | | | 165 | | | | 141,187 | |
14
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Washington Mutual Mortgage Pass-Through Certificates | | | | | | | | | | | | |
Series 2007-OA1, Class A1A 0.813%, 2/25/47(b) | | | U.S.$ | | | | 205 | | | $ | 165,732 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 643,711 | |
| | | | | | | | | | | | |
AGENCY FIXED RATE–0.1% | | | | | | | | | | | | |
Fannie Mae Grantor Trust | | | | | | | | | | | | |
Series 2004-T5, Class AB4 0.718%, 5/28/35 | | | | | | | 50 | | | | 45,443 | |
Federal National Mortgage Association REMICS Series 2010-117, Class DI 4.50%, 5/25/25(d) | | | | | | | 600 | | | | 66,126 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 111,569 | |
| | | | | | | | | | | | |
Total Collateralized Mortgage Obligations (cost $3,263,419) | | | | | | | | | | | 3,144,739 | |
| | | | | | | | | | | | |
INFLATION-LINKED SECURITIES–3.2% | | | | | | | | | | | | |
UNITED STATES–3.2% | | | | | | | | | | | | |
U.S. Treasury Inflation Index 0.125%, 4/15/19 (TIPS) (cost $2,506,001) | | | | | | | 2,452 | | | | 2,425,340 | |
| | | | | | | | | | | | |
AGENCIES–2.7% | | | | | | | | | | | | |
AGENCY DEBENTURES–2.7% | | | | | | | | | | | | |
Residual Funding Corp. Principal Strip Zero Coupon, 7/15/20 (cost $1,850,717) | | | | | | | 2,292 | | | | 2,035,766 | |
| | | | | | | | | | | | |
QUASI-SOVEREIGNS–1.6% | | | | | | | | | | | | |
QUASI-SOVEREIGN BONDS–1.6% | | | | | | | | | | | | |
CHILE–0.3% | | | | | | | | | | | | |
Empresa de Transporte de Pasajeros Metro SA 4.75%, 2/04/24(a) | | | | | | | 210 | | | | 217,358 | |
| | | | | | | | | | | | |
CHINA–0.3% | | | | | | | | | | | | |
Sinopec Group Overseas Development 2013 Ltd. 4.375%, 10/17/23(a) | | | | | | | 225 | | | | 235,700 | |
| | | | | | | | | | | | |
MALAYSIA–0.6% | | | | | | | | | | | | |
Petronas Capital Ltd. 5.25%, 8/12/19(a) | | | | | | | 420 | | | | 465,238 | |
| | | | | | | | | | | | |
MEXICO–0.4% | | | | | | | | | | | | |
Petroleos Mexicanos 3.50%, 7/18/18–1/30/23 | | | | | | | 272 | | | | 266,160 | |
| | | | | | | | | | | | |
Total Quasi-Sovereigns (cost $1,114,542) | | | | | | | | | | | 1,184,456 | |
| | | | | | | | | | | | |
GOVERNMENTS–SOVEREIGN AGENCIES–0.5% | | | | | | | | | | | | |
CANADA–0.1% | | | | | | | | | | | | |
NOVA Chemicals Corp. 5.25%, 8/01/23(a) | | | | | | | 74 | | | | 74,740 | |
| | | | | | | | | | | | |
COLOMBIA–0.1% | | | | | | | | | | | | |
Ecopetrol SA 5.875%, 5/28/45 | | | | | | | 57 | | | | 53,010 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
GERMANY–0.1% | | | | | | | | | | | | |
Landwirtschaftliche Rentenbank 5.125%, 2/01/17 | | | U.S.$ | | | | 70 | | | $ | 76,110 | |
| | | | | | | | | | | | |
ISRAEL–0.2% | | | | | | | | | | | | |
Israel Electric Corp. Ltd. 5.00%, 11/12/24(a) | | | | | | | 200 | | | | 201,500 | |
| | | | | | | | | | | | |
Total Governments–Sovereign Agencies (cost $406,209) | | | | | | | | | | | 405,360 | |
| | | | | | | | | | | | |
| | Shares | | | | |
PREFERRED STOCKS–0.4% | | | | | | | | | | | | |
FINANCIAL INSTITUTIONS–0.4% | | | | | | | | | | | | |
INSURANCE–0.2% | | | | | | | | | | | | |
Allstate Corp. (The) 5.10% | | | | | | | 7,925 | | | | 200,740 | |
| | | | | | | | | | | | |
REITS – 0.2% | | | | | | | | | | | | |
Sovereign Real Estate Investment Trust 12.00%(a) | | | | | | | 93 | | | | 124,620 | |
| | | | | | | | | | | | |
Total Preferred Stocks (cost $299,414) | | | | | | | | | | | 325,360 | |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | | |
LOCAL GOVERNMENTS–MUNICIPAL BONDS–0.4% | | | | | | | | | | | | |
UNITED STATES–0.4% | | | | | | | | | | | | |
State of California (State of California) Series 2010 7.625%, 3/01/40 (cost $203,224) | | | U.S.$ | | | | 200 | | | | 307,000 | |
| | | | | | | | | | | | |
EMERGING MARKETS–CORPORATE BONDS–0.1% | | | | | | | | | | | | |
INDUSTRIAL–0.1% | | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.1% | | | | | | | | | | | | |
Marfrig Overseas Ltd. 9.50%, 5/04/20(a) (cost $99,793) | | | | | | | 100 | | | | 101,000 | |
| | | | | | | | | | | | |
| | Shares | | | | |
WARRANTS–0.0% | | | | | | | | | | | | |
Talon Equity Co. NV, expiring 11/25/15(e)(f)(g) (cost $0) | | | | | | | 47 | | | | 0 | |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–2.2% | | | | | | | | | | | | |
TIME DEPOSIT–1.2% | | | | | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $894,866) | | | U.S.$ | | | | 895 | | | | 894,866 | |
| | | | | | | | | | | | |
15
| | |
INTERMEDIATE BOND PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
CERTIFICATES OF DEPOSIT – 1.0% | | | | | | | | | |
Svenska Handelsbanken/New York 0.225%, 3/23/15 (cost $788,009) | | | U.S.$ | | | | 788 | | | $ | 788,009 | |
| | | | | | | | | | | | |
Total Short-Term Investments (cost $1,682,875) | | | | | | | | | | | 1,682,875 | |
| | | | | | | | | | | | |
TOTAL INVESTMENTS – 110.6% (cost $82,141,201) | | | | | | | | | | | 84,387,641 | |
Other assets less liabilities –(10.6)% | | | | | | | | | | | (8,059,744 | ) |
| | | | | | | | | | | | |
NET ASSETS – 100.0% | | | | | | | | | | $ | 76,327,897 | |
| | | | | | | | | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | | Original Value | | | Value at December 31, 2014 | | | Unrealized Appreciation/ (Depreciation) | |
Purchased Contracts | | | | | | | | | | | | | | | | | | | | |
U.S. T-Note 10 Yr (CBT) Futures | | | 7 | | | | March 2015 | | | $ | 885,776 | | | $ | 887,578 | | | $ | 1,802 | |
| | | | | |
Sold Contracts | | | | | | | | | | | | | | | | | | | | |
U.S. T-Note 2 Yr (CBT) Futures | | | 4 | | | | March 2015 | | | | 875,557 | | | | 874,375 | | | | 1,182 | |
U.S. T-Note 5 Yr (CBT) Futures | | | 7 | | | | March 2015 | | | | 832,295 | | | | 832,508 | | | | (213 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | 2,771 | |
| | | | | | | | | | | | | | | | | | | | |
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
BNP Paribas SA | | JPY | 280,000 | | | USD | 2,618 | | | | 1/15/15 | | | $ | 279,907 | |
BNP Paribas SA | | AUD | 698 | | | USD | 577 | | | | 1/30/15 | | | | 8,966 | |
BNP Paribas SA | | NZD | 1,239 | | | USD | 952 | | | | 2/13/15 | | | | (10,602 | ) |
Brown Brothers Harriman & Co. | | GBP | 371 | | | USD | 578 | | | | 1/27/15 | | | | (613 | ) |
Credit Suisse International | | EUR | 474 | | | USD | 584 | | | | 1/09/15 | | | | 9,845 | |
Goldman Sachs Bank USA | | BRL | 1,021 | | | USD | 384 | | | | 1/05/15 | | | | 289 | |
Goldman Sachs Bank USA | | USD | 385 | | | BRL | 1,021 | | | | 1/05/15 | | | | (463 | ) |
Goldman Sachs Bank USA | | EUR | 781 | | | USD | 981 | | | | 1/09/15 | | | | 35,475 | |
Goldman Sachs Bank USA | | MXN | 2,748 | | | USD | 185 | | | | 1/15/15 | | | | (989 | ) |
Goldman Sachs Bank USA | | BRL | 1,021 | | | USD | 381 | | | | 2/03/15 | | | | 158 | |
JPMorgan Chase Bank | | BRL | 805 | | | USD | 315 | | | | 1/05/15 | | | | 11,667 | |
JPMorgan Chase Bank | | USD | 303 | | | BRL | 805 | | | | 1/05/15 | | | | (228 | ) |
Morgan Stanley & Co., Inc. | | USD | 351 | | | JPY | 41,971 | | | | 1/23/15 | | | | (679 | ) |
Royal Bank of Scotland PLC | | MXN | 6,032 | | | USD | 414 | | | | 1/15/15 | | | | 5,288 | |
Royal Bank of Scotland PLC | | USD | 799 | | | MXN | 10,958 | | | | 1/15/15 | | | | (57,082 | ) |
Royal Bank of Scotland PLC | | JPY | 41,836 | | | USD | 350 | | | | 1/23/15 | | | | 321 | |
State Street Bank & Trust Co. | | BRL | 216 | | | USD | 84 | | | | 1/05/15 | | | | 2,407 | |
State Street Bank & Trust Co. | | USD | 12 | | | EUR | 9 | | | | 1/09/15 | | | | (166 | ) |
State Street Bank & Trust Co. | | CAD | 1,093 | | | USD | 963 | | | | 1/14/15 | | | | 21,659 | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
State Street Bank & Trust Co. | | USD | 78 | | | CAD | 89 | | | | 1/14/15 | | | $ | (1,193 | ) |
State Street Bank & Trust Co. | | MXN | 10,880 | | | USD | 800 | | | | 1/15/15 | | | | 63,311 | |
State Street Bank & Trust Co. | | GBP | 203 | | | USD | 319 | | | | 1/27/15 | | | | 2,726 | |
State Street Bank & Trust Co. | | AUD | 680 | | | USD | 563 | | | | 1/30/15 | | | | 9,130 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 379,134 | |
| | | | | | | | | | | | | | | | |
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
Clearing Broker/(Exchange) & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at December 31, 2014 | | | Notional Amount (000) | | | Market Value | | | Unrealized Appreciation/ (Depreciation) | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | |
Morgan Stanley & Co. LLC/(INTRCONX): | | | | | | | | | | | | | | | | | | | | |
CDX-NAHY Series 23, 5 Year Index, 12/20/19* | | | 5.00 | % | | | 3.53 | % | | $ | 1,580 | | | $ | 100,288 | | | $ | 23,495 | |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Rate Type | | | | |
Clearing Broker /(Exchange) | | Notional Amount (000) | | | Termination Date | | | Payments made by the Fund | | | Payments received by the Fund | | | Unrealized Appreciation/ (Depreciation) | |
Morgan Stanley & Co., LLC/(CME Group) | | $ | 420 | | | | 12/18/17 | | | | 1.164 | % | | | 3 Month LIBOR | | | $ | 1,170 | |
Morgan Stanley & Co., LLC/(CME Group) | | | CAD 1,320 | | | | 10/03/19 | | | | 1.993 | % | | | 3 Month CDOR | | | | (14,716 | ) |
Morgan Stanley & Co., LLC/(CME Group) | | $ | 1,010 | | | | 10/07/19 | | | | 3 Month LIBOR | | | | 1.935 | % | | | 13,639 | |
Morgan Stanley & Co., LLC/(CME Group) | | | 380 | | | | 6/25/21 | | | | 2.243 | % | | | 3 Month LIBOR | | | | (6,257 | ) |
Morgan Stanley & Co., LLC/(CME Group) | | | 530 | | | | 1/14/24 | | | | 2.980 | % | | | 3 Month LIBOR | | | | (40,501 | ) |
Morgan Stanley & Co., LLC/(CME Group) | | | 460 | | | | 2/14/24 | | | | 2.889 | % | | | 3 Month LIBOR | | | | (30,393 | ) |
Morgan Stanley & Co., LLC/(CME Group) | | | 650 | | | | 4/28/24 | | | | 2.817 | % | | | 3 Month LIBOR | | | | (34,896 | ) |
Morgan Stanley & Co., LLC/(CME Group) | | | 450 | | | | 5/29/24 | | | | 3 Month LIBOR | | | | 2.628 | % | | | 15,696 | |
Morgan Stanley & Co., LLC/ (CME Group) | | | NZD 730 | | | | 9/25/24 | | | | 4.628 | % | | | 3 Month BKBM | | | | (30,979 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | (127,237 | ) |
| | | | | | | | | | | | | | | | | | | | |
17
| | |
INTERMEDIATE BOND PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty & Referenced Obligation | | Fixed Rate (Pay) Receive | | | Implied Credit Spread at December 31, 2014 | | | Notional Amount (000) | | | Market Value | | | Upfront Premiums Paid (Received) | | | Unrealized Appreciation/ (Depreciation) | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | | | | | |
Credit Suisse International: | | | | | | | | | | | | | | | | | | | | | | | | |
Anadarko Petroleum Corp., 5.95%, 9/15/16, 9/20/17* | | | 1.00 | % | | | 0.60 | % | | $ | 270 | | | $ | 2,849 | | | $ | (5,167 | ) | | $ | 8,016 | |
Kohl’s Corp., 6.25%, 12/15/17, 6/20/19* | | | 1.00 | | | | 0.84 | | | | 92 | | | | 595 | | | | (1,109 | ) | | | 1,704 | |
Kohl’s Corp., 6.25%, 12/15/17, 6/20/19* | | | 1.00 | | | | 0.84 | | | | 54 | | | | 349 | | | | (584 | ) | | | 933 | |
Kohl’s Corp., 6.25%, 12/15/17, 6/20/19* | | | 1.00 | | | | 0.84 | | | | 37 | | | | 242 | | | | (452 | ) | | | 694 | |
Kohl’s Corp., 6.25%, 12/15/17, 6/20/19* | | | 1.00 | | | | 0.84 | | | | 37 | | | | 241 | | | | (448 | ) | | | 689 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 4,276 | | | $ | (7,760 | ) | | $ | 12,036 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | Rate Type | | | | |
Swap Counterparty | | Notional Amount (000) | | | Termination Date | | | Payments made by the Fund | | | Payments received by the Fund | | | Unrealized Appreciation/ (Depreciation) | |
JPMorgan Chase Bank | | $ | 1,390 | | | | 1/30/17 | | | | 1.059 | % | | | 3 Month LIBOR | | | $ | (9,234 | ) |
JPMorgan Chase Bank | | | 1,520 | | | | 2/07/22 | | | | 2.043 | % | | | 3 Month LIBOR | | | | (10,666 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | $ | (19,900 | ) |
| | | | | | | | | | | | | | | | | | | | |
(a) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the aggregate market value of these securities amounted to $16,992,641 or 22.3% of net assets. |
(b) | | Floating Rate Security. Stated interest rate was in effect at December 31, 2014. |
(c) | | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
(f) | | Fair valued by the Adviser. |
(g) | | Non-income producing security. |
Currency Abbreviations:
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
EUR—Euro
GBP—Great British Pound
JPY—Japanese Yen
MXN—Mexican Peso
NZD—New Zealand Dollar
USD—United States Dollar
18
| | |
| | AllianceBernstein Variable Products Series Fund |
Glossary:
ABS—Asset-Backed Securities
BKBM—Bank Bill Benchmark (New Zealand)
CBT—Chicago Board of Trade
CDOR—Canadian Dealer Offered Rate
CDX-NAHY—North American High Yield Credit Default Swap Index
CMBS—Commercial Mortgage-Backed Securities
CME—Chicago Mercantile Exchange
GSE—Government-Sponsored Enterprise
INTRCONX—Inter-Continental Exchange
LIBOR—London Interbank Offered Rates
REIT—Real Estate Investment Trust
TBA—To Be Announced
TIPS—Treasury Inflation Protected Security
See notes to financial statements.
19
| | |
INTERMEDIATE BOND PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value (cost $82,141,201) | | $ | 84,387,641 | |
Cash | | | 2,364 | |
Due from broker | | | 147,177 | (a) |
Foreign currencies, at value (cost $2,583,493) | | | 2,366,065 | |
Receivable for investment securities sold and foreign currency transactions | | | 3,294,583 | |
Interest and dividends receivable | | | 514,377 | |
Unrealized appreciation on forward currency exchange contracts | | | 451,149 | |
Unrealized appreciation on credit default swaps | | | 12,036 | |
Receivable for variation margin on exchange-traded derivatives | | | 250 | |
Receivable for capital stock sold | | | 124 | |
| | | | |
Total assets | | | 91,175,766 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased and foreign currency transactions | | | 14,446,438 | |
Payable for capital stock redeemed | | | 143,802 | |
Unrealized depreciation on forward currency exchange contracts | | | 72,015 | |
Advisory fee payable | | | 29,318 | |
Unrealized depreciation on interest rate swaps | | | 19,900 | |
Administrative fee payable | | | 12,310 | |
Upfront premium received on credit default swaps | | | 7,760 | |
Distribution fee payable | | | 4,237 | |
Payable for variation margin on exchange-traded derivatives | | | 2,000 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 109,977 | |
| | | | |
Total liabilities | | | 14,847,869 | |
| | | | |
NET ASSETS | | $ | 76,327,897 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 6,731 | |
Additional paid-in capital | | | 69,865,635 | |
Undistributed net investment income | | | 2,091,439 | |
Accumulated net realized gain on investment and foreign currency transactions | | | 2,067,042 | |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 2,297,050 | |
| | | | |
| | $ | 76,327,897 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 56,436,504 | | | | 4,963,519 | | | $ | 11.37 | |
B | | $ | 19,891,393 | | | | 1,767,152 | | | $ | 11.26 | |
(a) | | Represents amounts on deposit at the broker as collateral for open derivative contracts. |
See notes to financial statements.
20
| | |
INTERMEDIATE BOND PORTFOLIO | | |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Interest | | $ | 2,656,914 | |
Dividends—unaffiliated issuers | | | 27,745 | |
Consent fee income | | | 1,598 | |
| | | | |
| | | 2,686,257 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 362,166 | |
Distribution fee—Class B | | | 53,389 | |
Transfer agency—Class A | | | 4,789 | |
Transfer agency—Class B | | | 1,722 | |
Custodian | | | 136,962 | |
Audit and tax | | | 74,642 | |
Administrative | | | 49,294 | |
Legal | | | 33,411 | |
Printing | | | 32,838 | |
Directors’ fees | | | 4,525 | |
Miscellaneous | | | 6,002 | |
| | | | |
Total expenses | | | 759,740 | |
| | | | |
Net investment income | | | 1,926,517 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 2,012,074 | |
Futures | | | 6,243 | |
Swaps | | | (93,381 | ) |
Foreign currency transactions | | | 244,257 | |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | 972,012 | |
Futures | | | 40,871 | |
Swaps | | | (116,797 | ) |
Foreign currency denominated assets and liabilities and other assets | | | 72,482 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 3,137,761 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 5,064,278 | |
| | | | |
See notes to financial statements.
21
| | |
| | |
INTERMEDIATE BOND PORTFOLIO | | |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 1,926,517 | | | $ | 2,576,017 | |
Net realized gain on investment and foreign currency transactions | | | 2,169,193 | | | | 1,409,766 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities and other assets | | | 968,568 | | | | (6,216,473 | ) |
| | | | | | | | |
Net increase (decrease) in net assets from operations | | | 5,064,278 | | | | (2,230,690 | ) |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (2,042,058 | ) | | | (2,531,715 | ) |
Class B | | | (688,955 | ) | | | (845,380 | ) |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (786,629 | ) | | | (2,053,818 | ) |
Class B | | | (290,472 | ) | | | (749,834 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (9,226,036 | ) | | | (15,758,067 | ) |
| | | | | | | | |
Total decrease | | | (7,969,872 | ) | | | (24,169,504 | ) |
NET ASSETS | | | | | | | | |
Beginning of period | | | 84,297,769 | | | | 108,467,273 | |
| | | | | | | | |
End of period (including undistributed net investment income of $2,091,439 and $2,759,361, respectively) | | $ | 76,327,897 | | | $ | 84,297,769 | |
| | | | | | | | |
See notes to financial statements.
22
| | |
INTERMEDIATE BOND PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Intermediate Bond Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is to generate income and price appreciation without assuming what the Adviser considers undue risk. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement
23
| | |
INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
The fair value of debt instruments, such as bonds, and over-the-counter derivatives is generally based on market price quotations, recently executed market transactions (where observable) or industry recognized modeling techniques and are generally classified as Level 2. Pricing vendor inputs to Level 2 valuations may include quoted prices for similar investments in active markets, interest rate curves, coupon rates, currency rates, yield curves, option adjusted spreads, default rates, credit spreads and other unique security features in order to estimate the relevant cash flows which are then discounted to calculate fair values. If these inputs are unobservable and significant to the fair value, these investments will be classified as Level 3. In addition, non-agency rated investments are classified as Level 3.
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
Valuations of mortgage-backed or other asset-backed securities, by pricing vendors, are based on both proprietary and industry recognized models and discounted cash flow techniques. Significant inputs to the valuation of these instruments are value of the collateral, the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices for residential mortgages. Significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices. Mortgage and asset-backed securities for which management has collected current observable data through pricing services are generally categorized within Level 2. Those investments for which current observable data has not been provided are classified as Level 3.
Other fixed income investments, including non-U.S. government and corporate debt, are generally valued using quoted market prices, if available, which are typically impacted by current interest rates, maturity dates and any perceived credit risk of the issuer. Additionally, in the absence of quoted market prices, these inputs are used by pricing vendors to derive a valuation based upon industry or proprietary models which incorporate issuer specific data with relevant yield/spread comparisons with more widely quoted bonds with similar key characteristics. Those investments for which there are observable inputs are classified as Level 2. Where the inputs are not observable, the investments are classified as Level 3.
24
| | |
| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Governments–Treasuries | | $ | –0 | – | | $ | 17,408,339 | | | $ | –0 | – | | $ | 17,408,339 | |
Corporates–Investment Grade | | | –0 | – | | | 17,388,003 | | | | –0 | – | | | 17,388,003 | |
Mortgage Pass-Throughs | | | –0 | – | | | 15,291,592 | | | | –0 | – | | | 15,291,592 | |
Asset-Backed Securities | | | –0 | – | | | 9,826,753 | | | | 1,289,761 | | | | 11,116,514 | |
Commercial Mortgage-Backed Securities | | | –0 | – | | | 6,831,239 | | | | 292,194 | | | | 7,123,433 | |
Corporates–Non-Investment Grade | | | –0 | – | | | 4,447,864 | | | | –0 | – | | | 4,447,864 | |
Collateralized Mortgage Obligations | | | –0 | – | | | 111,569 | | | | 3,033,170 | | | | 3,144,739 | |
Inflation-Linked Securities | | | –0 | – | | | 2,425,340 | | | | –0 | – | | | 2,425,340 | |
Agencies | | | –0 | – | | | 2,035,766 | | | | –0 | – | | | 2,035,766 | |
Quasi-Sovereigns | | | –0 | – | | | 1,184,456 | | | | –0 | – | | | 1,184,456 | |
Governments–Sovereign Agencies | | | –0 | – | | | 405,360 | | | | –0 | – | | | 405,360 | |
Preferred Stocks | | | 200,740 | | | | 124,620 | | | | –0 | – | | | 325,360 | |
Local Governments–Municipal Bonds | | | –0 | – | | | 307,000 | | | | –0 | – | | | 307,000 | |
Emerging Markets–Corporate Bonds | | | –0 | – | | | 101,000 | | | | –0 | – | | | 101,000 | |
Warrants^ | | | –0 | – | | | –0 | – | | | –0 | –^ | | | –0 | – |
Short-Term Investments | | | | | | | | | | | | | | | | |
Time Deposit | | | –0 | – | | | 894,866 | | | | –0 | – | | | 894,866 | |
Certificates of Deposit | | | –0 | – | | | 788,009 | | | | –0 | – | | | 788,009 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 200,740 | | | | 79,571,776 | | | | 4,615,125 | | | | 84,387,641 | |
Other Financial Instruments* : | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Futures | | | 2,984 | | | | –0 | – | | | –0 | – | | | 2,984 | # |
Forward Currency Exchange Contracts | | | –0 | – | | | 451,149 | | | | –0 | – | | | 451,149 | |
Centrally Cleared Credit Default Swaps | | | –0 | – | | | 23,495 | | | | –0 | – | | | 23,495 | # |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | 30,505 | | | | –0 | – | | | 30,505 | # |
Credit Default Swaps | | | –0 | – | | | 12,036 | | | | –0 | – | | | 12,036 | |
Liabilities: | | | | | | | | | | | | | | | | |
Futures | | | (213 | ) | | | –0 | – | | | –0 | – | | | (213 | )# |
Forward Currency Exchange Contracts | | | –0 | – | | | (72,015 | ) | | | –0 | – | | | (72,015 | ) |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | (157,742 | ) | | | –0 | – | | | (157,742 | )# |
Interest Rate Swaps | | | –0 | – | | | (19,900 | ) | | | –0 | – | | | (19,900 | ) |
| | | | | | | | | | | | | | | | |
Total** | | $ | 203,511 | | | $ | 79,839,304 | | | $ | 4,615,125 | | | $ | 84,657,940 | |
| | | | | | | | | | | | | | | | |
^ | | The Portfolio held securities with zero market value at period end. |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
# | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
** | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
25
| | |
INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value.
| | | | | | | | | | | | |
| | Asset- Backed Securities | | | Commercial Mortgage- Backed Securities | | | Corporates - Non-Investment Grade^ | |
Balance as of 12/31/13 | | $ | 1,270,213 | | | $ | 186,676 | | | $ | –0 | – |
Accrued discounts/(premiums) | | | 2,895 | | | | (268 | ) | | | | |
Realized gain (loss) | | | 3,301 | | | | 4,953 | | | | (3,506 | ) |
Change in unrealized appreciation/depreciation | | | (6,063 | ) | | | (3,946 | ) | | | 3,506 | |
Purchases | | | 884,585 | | | | 212,749 | | | | –0 | – |
Sales | | | (865,170 | ) | | | (107,970 | ) | | | –0 | – |
Transfers in to Level 3 | | | –0 | – | | | –0 | – | | | –0 | – |
Transfers out of Level 3 | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | |
Balance as of 12/31/14 | | $ | 1,289,761 | | | $ | 292,194 | | | $ | –0 | – |
| | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from Investments held as of 12/31/14* | | $ | (4,032 | ) | | $ | (3,135 | ) | | $ | –0 | – |
| | | | | | | | | | | | |
| | | |
| | Collateralized Mortgage Obligations | | | Common Stocks | | | Warrants^^ | |
Balance as of 12/31/13 | | $ | 1,240,216 | | | $ | 3,690 | | | $ | –0 | – |
Accrued discounts/(premiums) | | | 9,814 | | | | –0 | – | | | –0 | – |
Realized gain (loss) | | | (12,870 | ) | | | 3,742 | | | | –0 | – |
Change in unrealized appreciation/depreciation | | | 38,178 | | | | (3,686 | ) | | | –0 | – |
Purchases | | | 1,932,219 | | | | –0 | – | | | –0 | – |
Sales | | | (174,387 | ) | | | (3,746 | ) | | | –0 | – |
Transfers in to Level 3 | | | –0 | – | | | –0 | – | | | –0 | – |
Transfers out of Level 3 | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | |
Balance as of 12/31/14 | | $ | 3,033,170 | | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from Investments held as of 12/31/14* | | $ | 38,180 | | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | |
| | | |
| | Total | | | | | | | |
Balance as of 12/31/13 | | $ | 2,700,795 | | | | | | | | | |
Accrued discounts/(premiums) | | | 12,441 | | | | | | | | | |
Realized gain (loss) | | | (4,380 | ) | | | | | | | | |
Change in unrealized appreciation/depreciation | | | 27,989 | | | | | | | | | |
Purchases | | | 3,029,553 | | | | | | | | | |
Sales | | | (1,151,273 | ) | | | | | | | | |
Transfers in to Level 3 | | | –0 | – | | | | | | | | |
Transfers out of Level 3 | | | –0 | – | | | | | | | | |
| | | | | | | | | | | | |
Balance as of 12/31/14 | | $ | 4,615,125 | | | | | | | | | |
| | | | | | | | | | | | |
Net change in unrealized appreciation/depreciation from Investments held as of 12/31/14* | | $ | 31,013 | | | | | | | | | |
| | | | | | | | | | | | |
* | | The unrealized appreciation/depreciation is included in net change in unrealized appreciation/depreciation of investments in the accompanying statement of operations. |
^ | | The Portfolio held a security with zero market value at the beginning of the period. |
^^ | | The Portfolio held a security with zero market value at period end. |
As of December 31, 2014 all Level 3 securities were priced by third party vendors or at cost, which approximates fair value.
26
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| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
27
| | |
INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion, .40% of the next $2.5 billion and .35% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $49,294.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $269, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
NOTE C : Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D : Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 28,975,364 | | | $ | 27,678,441 | |
U.S. government securities | | | 185,332,040 | | | | 184,571,572 | |
28
| | |
| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding futures, swaps and foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 82,143,768 | |
| | | | |
Gross unrealized appreciation | | | 2,940,720 | |
Gross unrealized depreciation | | | (696,847 | ) |
| | | | |
Net unrealized appreciation | | $ | 2,243,873 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:
The Portfolio may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Portfolio bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Portfolio may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Portfolio enters into futures, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Portfolio to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Portfolio to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended December 31, 2014, the Portfolio held futures for hedging and non-hedging purposes.
| • | | Forward Currency Exchange Contracts |
The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Portfolio. 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.
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INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
During the year ended December 31, 2014, the Portfolio held forward currency exchange contracts for hedging and non-hedging purposes.
The Portfolio may enter into swaps to hedge its exposure to interest rates, credit risk, or currencies. The Portfolio may also enter into swaps for non-hedging purposes as a means of gaining market exposures, including by making direct investments in foreign currencies, as described below under “Currency Transactions”. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The payment flows are usually netted against each other, with the difference being paid by one party to the other. In addition, collateral may be pledged or received by the Portfolio in accordance with the terms of the respective swaps to provide value and recourse to the Portfolio or its counterparties in the event of default, bankruptcy or insolvency by one of the parties to the swap.
Risks may arise as a result of the failure of the counterparty to the swap to comply with the terms of the swap. The loss incurred by the failure of a counterparty is generally limited to the net interim payment to be received by the Portfolio, and/or the termination value at the end of the contract. Therefore, the Portfolio considers the creditworthiness of each counterparty to a swap in evaluating potential counterparty risk. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by the posting of collateral by the counterparty to the Portfolio to cover the Portfolio’s exposure to the counterparty. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying securities. The Portfolio accrues for the interim payments on swaps on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swaps on the statement of assets and liabilities, where applicable. Once the interim payments are settled in cash, the net amount is recorded as realized gain/(loss) on swaps on the statement of operations, in addition to any realized gain/(loss) recorded upon the termination of swaps. Upfront premiums paid or received are recognized as cost or proceeds on the statement of assets and liabilities and are amortized on a straight line basis over the life of the contract. Amortized upfront premiums are included in net realized gain/(loss) from swaps on the statement of operations. Fluctuations in the value of swaps are recorded as a component of net change in unrealized appreciation/depreciation of swaps on the statement of operations.
Certain standardized swaps, including certain interest rate swaps and credit default swaps, are (or soon will be) subject to mandatory central clearing. Cleared swaps are transacted through futures commission merchants (“FCMs”) that are members of central clearinghouses, with the clearinghouse serving as central counterparty, similar to transactions in futures contracts. Centralized clearing will be required for additional categories of swaps on a phased-in basis based on requirements published by the Securities and Exchange Commission and Commodity Futures Trading Commission.
At the time the Portfolio enters into a centrally cleared swap, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for swaps cleared through a central clearinghouse’s exchange is generally less than privately negotiated swaps, since the clearinghouse, which is the issuer or counterparty to each exchange-traded swap, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Interest Rate Swaps:
The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Because the Portfolio holds fixed rate bonds, the value of these bonds may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, the Portfolio may enter into interest rate swaps. Interest rate swaps are agreements between two parties to exchange cash flows based on a notional amount. The Portfolio may elect to pay a fixed rate and receive a floating rate, or, receive a fixed rate and pay a floating rate on a notional amount.
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| | AllianceBernstein Variable Products Series Fund |
In addition, the Portfolio may also enter into interest rate swap transactions to preserve a return or spread on a particular investment or portion of its portfolio, or protecting against an increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swaps involve the exchange by a Portfolio with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) computed based on a contractually-based principal (or “notional”) amount. Interest rate swaps are entered into on a net basis (i.e., the two payment streams are netted out, with the Portfolio receiving or paying, as the case may be, only the net amount of the two payments).
During the year ended December 31, 2014, the Portfolio held interest rate swaps for hedging and non-hedging purposes.
Credit Default Swaps:
The Portfolio may enter into credit default swaps, including to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults by corporate and sovereign issuers held by the Portfolio, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. The Portfolio may purchase credit protection (“Buy Contract”) or provide credit protection (“Sale Contract”) on the referenced obligation of the credit default swap. During the term of the swap, the Portfolio receives/(pays) fixed payments from/(to) the respective counterparty, calculated at the agreed upon rate applied to the notional amount. If the Portfolio is a buyer/(seller) of protection and a credit event occurs, as defined under the terms of the swap, the Portfolio will either (i) receive from the seller/(pay to the buyer) of protection an amount equal to the notional amount of the swap (the “Maximum Payout Amount”) and deliver/(take delivery of) the referenced obligation or (ii) receive/(pay) a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation.
In certain circumstances Maximum Payout Amounts may be partially offset by recovery values of the respective referenced obligations, upfront premium received upon entering into the agreement, or net amounts received from settlement of buy protection credit default swaps entered into by the Portfolio for the same reference obligation with the same counterparty. As of December 31, 2014, the Portfolio did not have Buy Contracts outstanding with respect to the same referenced obligation and same counterparty for its Sale Contracts outstanding.
Credit default swaps may involve greater risks than if a Portfolio had invested in the referenced obligation directly. Credit default swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. If the Portfolio is a buyer of protection and no credit event occurs, it will lose the payments it made to its counterparty. If the Portfolio is a seller of protection and a credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received, may be less than the Maximum Payout Amount it pays to the buyer, resulting in a net loss to the Portfolio.
During the year ended December 31, 2014, the Portfolio held credit default swaps for hedging and non-hedging purposes.
Implied credit spreads over U.S. Treasuries of comparable maturity utilized in determining the market value of credit default swaps on issuers as of period end are disclosed in the portfolio of investments. The implied spreads serve as an indicator of the current status of the payment/performance risk and typically reflect the likelihood of default by the issuer of the referenced obligation. The implied credit spread of a particular reference obligation also reflects the cost of buying/selling protection and may reflect upfront payments required to be made to enter into the agreement. Widening credit spreads typically represent a deterioration of the referenced obligation’s credit soundness and greater likelihood of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced obligation.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
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INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolio and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
The Portfolio’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
At December 31, 2014, the Portfolio had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Interest rate contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 33,489 | * | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 157,955 | * |
Credit contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | | 23,495 | * | | | | | | |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | | 451,149 | | | Unrealized depreciation on forward currency exchange contracts | | | 72,015 | |
Interest rate contracts | | | | | | | | Unrealized depreciation on interest rate swaps | | | 19,900 | |
Credit contracts | | Unrealized appreciation on credit default swaps | | | 12,036 | | | | | | | |
| | | | | | | | | | | | |
Total | | | | $ | 520,169 | | | | | $ | 249,870 | |
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* | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
The effect of derivative instruments on the statement of operations for the year ended December 31, 2014:
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Interest rate contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | $ | 6,243 | | | $ | 40,871 | |
Foreign exchange contracts | | Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities | | | 108,472 | | | | 292,913 | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (2,753 | ) | | | (203,476 | ) |
Credit contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (90,628 | ) | | | 86,679 | |
| | | | | | | | | | |
Total | | | | $ | 21,334 | | | $ | 216,987 | |
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| | AllianceBernstein Variable Products Series Fund |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2014:
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Futures: | | | | |
Average original value of buy contracts | | $ | 1,276,308 | |
Average original value of sale contracts | | $ | 1,517,672 | |
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Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 2,331,606 | |
Average principal amount of sale contracts | | $ | 7,930,341 | |
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Interest Rate Swaps: | | | | |
Average notional amount | | $ | 2,910,000 | |
| |
Centrally Cleared Interest Rate Swaps: | | | | |
Average notional amount | | $ | 4,848,177 | |
| |
Credit Default Swaps: | | | | |
Average notional amount of sale contracts | | $ | 401,246 | |
| |
Centrally Cleared Credit Default Swaps: | | | | |
Average notional amount of buy contracts | | $ | 3,363,250 | (a) |
Average notional amount of sale contracts | | $ | 2,151,625 | (b) |
(a) | | Positions were open for ten months during the year. |
(b) | | Positions were open for four months during the year. |
For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Portfolio as of December 31, 2014:
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Counterparty | | Derivative Assets Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Received | | | Security Collateral Received | | | Net Amount of Derivatives Assets | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Goldman Sachs & Co.** | | $ | 250 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 250 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 250 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 250 | |
| | | | | | | | | | | | | | | | | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA | | $ | 288,873 | | | $ | (10,602 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 278,271 | |
Credit Suisse International | | | 14,121 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 14,121 | |
Goldman Sachs Bank USA | | | 35,922 | | | | (1,452 | ) | | | –0 | – | | | –0 | – | | | 34,470 | |
JPMorgan Chase Bank | | | 11,667 | | | | (11,667 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Royal Bank of Scotland PLC | | | 5,609 | | | | (5,609 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 99,233 | | | | (1,359 | ) | | | –0 | – | | | –0 | – | | | 97,874 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 455,425 | | | $ | (30,689 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 424,736 | ^ |
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INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Pledged* | | | Security Collateral Pledged | | | Net Amount of Derivatives Liabilities | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Morgan Stanley & Co., LLC** | | $ | 2,000 | | | $ | –0 | – | | $ | (2,000 | ) | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 2,000 | | | $ | –0 | – | | $ | (2,000 | ) | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA | | $ | 10,602 | | | $ | (10,602 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
Brown Brothers Harriman & Co. | | | 613 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 613 | |
Goldman Sachs Bank USA | | | 1,452 | | | | (1,452 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank | | | 20,128 | | | | (11,667 | ) | | | –0 | – | | | –0 | – | | | 8,461 | |
Morgan Stanley & Co., Inc. | | | 679 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 679 | |
Royal Bank of Scotland PLC | | | 57,082 | | | | (5,609 | ) | | | –0 | – | | | –0 | – | | | 51,473 | |
State Street Bank & Trust Co. | | | 1,359 | | | | (1,359 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 91,915 | | | $ | (30,689 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 61,226 ^ | |
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* | | The actual collateral received/pledged may be more than the amount reported due to overcollateralization. |
** | | Cash has been posted for initial margin requirements for exchange traded derivatives outstanding at December 31, 2014. |
^ | | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
3. Dollar Rolls
The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the Portfolio of securities for delivery in the current month and the Portfolio’s simultaneously contracting to repurchase substantially similar (same type and coupon) securities on a specified future date. During the roll period, the Portfolio forgoes principal and interest paid on the securities. The Portfolio is compensated by the difference between the current sales price and the lower forward price for the future purchase (often referred to as the “drop”) as well as by the interest earned on the cash proceeds of the initial sale. Dollar rolls involve the risk that the market value of the securities the Portfolio is obligated to repurchase under the agreement may decline below the repurchase price. Dollar rolls are speculative techniques. For the year ended December 31, 2014, the Portfolio earned drop income of $389,464 which is included in interest income in the accompanying statement of operations.
4. Reverse Repurchase Agreements
The Portfolio may enter into reverse repurchase transactions (“RVP”) in accordance with the terms of a Master Repurchase Agreement (“MRA”), under which the Portfolio sells securities and agrees to repurchase them at a mutually agreed upon date and price. At the time the Portfolio enters into a reverse repurchase agreement, it will establish a segregated account with the custodian containing liquid assets having a value comparable to the repurchase price. Under the MRA and other Master Agreements, the Portfolio is permitted to offset payables and/or receivables with collateral held and/or posted to the counterparty and create one single net payment due to or from the Portfolio in the event of a default. In the event of a default by a MRA counterparty, the Portfolio may be considered an unsecured creditor with respect to any excess collateral (collateral with a market value in excess of the repurchase price) held by and/or posted to the counterparty, and as such the return of such excess collateral may be delayed or denied. For the year ended December 31, 2014, the Portfolio had no transactions in reverse repurchase agreements.
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| | AllianceBernstein Variable Products Series Fund |
NOTE E: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 146,845 | | | | 74,962 | | | | | $ | 1,679,669 | | | $ | 884,617 | |
Shares issued in reinvestment of dividends and distributions | | | 252,111 | | | | 413,111 | | | | | | 2,828,687 | | | | 4,585,533 | |
Shares redeemed | | | (948,062 | ) | | | (1,408,318 | ) | | | | | (10,850,612 | ) | | | (16,566,656 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (549,106 | ) | | | (920,245 | ) | | | | $ | (6,342,256 | ) | | $ | (11,096,506 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 206,267 | | | | 92,014 | | | | | $ | 2,332,924 | | | $ | 1,077,143 | |
Shares issued in reinvestment of dividends and distributions | | | 88,078 | | | | 145,019 | | | | | | 979,427 | | | | 1,595,214 | |
Shares redeemed | | | (548,694 | ) | | | (628,054 | ) | | | | | (6,196,131 | ) | | | (7,333,918 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (254,349 | ) | | | (391,021 | ) | | | | $ | (2,883,780 | ) | | $ | (4,661,561 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE F: Risks Involved in Investing in the Portfolio
Interest Rate Risk and Credit Risk—Interest rate risk is the risk that changes in interest rates will affect the value of the Portfolio’s investments in fixed-income debt securities such as bonds or notes. Increases in interest rates may cause the value of the Portfolio’s investments to decline. Credit risk is the risk that the issuer or guarantor of a debt security, or the counterparty to a derivative contract, will be unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. The degree of risk for a particular security may be reflected in its credit rating. Credit risk is greater for medium quality and lower-rated securities. Lower-rated debt securities and similar unrated securities (commonly known as “junk bonds”) have speculative elements or are predominantly speculative risks.
Duration Risk—Duration is the measure that relates the expected price volatility of a fixed-income security to changes in interest rates. The duration of a fixed-income security may be shorter than or equal to full maturity of a fixed-income security. Fixed-income securities with longer durations have more risk and will decrease in price as interest rates rise. For example, a fixed-income security with a duration of three years will decrease in value by approximately 3% if interest rates increase by 1%.
Liquidity Risk—Liquidity risk occurs when certain investments become difficult to purchase or sell. Difficulty in selling less liquid securities may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of liquidity risk may include low trading volumes, large positions and heavy redemptions of fixed-income mutual fund shares. Over recent years, liquidity risk has also increased because the capacity of dealers in the secondary market for fixed-income securities to make markets in these securities has decreased, even as the overall bond market has grown significantly, due to, among other things, structural changes, additional regulatory requirements and capital and risk restraints that have led to reduced inventories. Liquidity risk may be higher in an rising interest rate environment, when the value and liquidity of fixed-income securities generally go down.
Redemption Risk—A Portfolio may experience heavy redemptions that could cause the Portfolio to liquidate its assets at inopportune times or at a loss or depressed value, which could cause the value of your investment to decline.
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory and other uncertainties.
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INTERMEDIATE BOND PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Inflation Risk—This is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the real value of the Portfolio’s assets can decline as can the real value of the Portfolio’s distributions.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Leverage Risk—When the Portfolio borrows money or otherwise leverages its portfolio, it may be volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Portfolio’s investments. The Portfolio may create leverage through the use of reverse repurchase arrangements, forward currency exchange contracts, forward commitments, dollar rolls or futures contracts or by borrowing money. The use of derivative instruments by the Portfolio, such as forwards, futures, options and swaps, may also result in a form of leverage. Leverage may result in higher returns to the Portfolio than if the Portfolio were not leveraged, but may also adversely affect returns, particularly if the market is declining.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE G: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE H: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 2,731,013 | | | $ | 4,448,851 | |
Net long-term capital gains | | | 1,077,101 | | | | 1,731,896 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 3,808,114 | | | $ | 6,180,747 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 3,314,961 | |
Undistributed net capital gain | | | 1,228,137 | |
Accumulated capital and other losses | | | (950 | )(a) |
Unrealized appreciation/(depreciation) | | | 1,913,382 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 6,455,530 | |
| | | | |
(a) | | As of December 31, 2014, the Portfolio had cumulative deferred loss on straddles of $950. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax treatment of swaps and Treasury inflation-protected securities, and the realization for tax purposes of gains/losses on certain derivative instruments. |
36
| | |
| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to the tax treatment of swaps, reclassifications of foreign currency and paydown gains/losses, and the tax treatment of clearing fees resulted in a net increase in undistributed net investment income and a net decrease in accumulated net realized gain on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE I: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
37
| | |
| | |
INTERMEDIATE BOND PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $11.22 | | | | $12.30 | | | | $12.54 | | | | $12.39 | | | | $11.98 | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .28 | | | | .32 | | | | .33 | | | | .42 | | | | .48 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .44 | | | | (.59 | ) | | | .35 | # | | | .38 | | | | .60 | |
Contributions from Adviser | | | –0 | – | | | –0 | – | | | .05 | # | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .72 | | | | (.27 | ) | | | .73 | | | | .80 | | | | 1.08 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.41 | ) | | | (.45 | ) | | | (.58 | ) | | | (.60 | ) | | | (.67 | ) |
Distributions from net realized gain on investment transactions | | | (.16 | ) | | | (.36 | ) | | | (.39 | ) | | | (.05 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.57 | ) | | | (.81 | ) | | | (.97 | ) | | | (.65 | ) | | | (.67 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $11.37 | | | | $11.22 | | | | $12.30 | | | | $12.54 | | | | $12.39 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 6.48 | % | | | (2.16 | )%* | | | 6.05 | %* | | | 6.64 | % | | | 9.20 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $56,437 | | | | $61,848 | | | | $79,104 | | | | $106,028 | | | | $119,599 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .88 | % | | | .77 | % | | | .70 | % | | | .65 | % | | | .68 | %+ |
Net investment income | | | 2.46 | % | | | 2.74 | % | | | 2.67 | % | | | 3.42 | % | | | 3.90 | %+ |
Portfolio turnover rate** | | | 262 | % | | | 217 | % | | | 116 | % | | | 108 | % | | | 94 | % |
See footnote summary on page 39.
38
| | |
| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $11.11 | | | | $12.17 | | | | $12.41 | | | | $12.26 | | | | $11.86 | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .25 | | | | .29 | | | | .30 | | | | .39 | | | | .44 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .43 | | | | (.58 | ) | | | .35 | # | | | .37 | | | | .60 | |
Contributions from Adviser | | | –0 | – | | | –0 | – | | | .05 | # | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .68 | | | | (.29 | ) | | | .70 | | | | .76 | | | | 1.04 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.37 | ) | | | (.41 | ) | | | (.55 | ) | | | (.56 | ) | | | (.64 | ) |
Distributions from net realized gain on investment transactions | | | (.16 | ) | | | (.36 | ) | | | (.39 | ) | | | (.05 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.53 | ) | | | (.77 | ) | | | (.94 | ) | | | (.61 | ) | | | (.64 | ) |
| | | | | | | | | | | | | | | �� | | | | | |
Net asset value, end of period | | | $11.26 | | | | $11.11 | | | | $12.17 | | | | $12.41 | | | | $12.26 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 6.22 | % | | | (2.34 | )%* | | | 5.79 | %* | | | 6.38 | % | | | 8.93 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $19,891 | | | | $22,450 | | | | $29,363 | | | | $33,973 | | | | $39,025 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.13 | % | | | 1.02 | % | | | .96 | % | | | .90 | % | | | .93 | %+ |
Net investment income | | | 2.21 | % | | | 2.49 | % | | | 2.43 | % | | | 3.17 | % | | | 3.64 | %+ |
Portfolio turnover rate** | | | 262 | % | | | 217 | % | | | 116 | % | | | 108 | % | | | 94 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
# | | Amount reclassified from realized gain (loss) on investment transactions. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2013, December 31, 2012 and December 31, 2010 and by 0.02%, 0.05% and 0.04%, respectively. |
| | Includes the Adviser’s reimbursement in respect of the Lehman Bankruptcy Claim which contributed to the Portfolio’s performance by 0.38% for the year-ended December 31, 2012. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
** | | The Portfolio accounts for dollar roll transactions as purchases and sales. |
| | See notes to financial statements. |
39
| | |
| | |
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Intermediate Bond Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Intermediate Bond Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)), as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Intermediate Bond Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
40
| | |
| | |
2014 FEDERAL TAX INFORMATION | | |
(unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 0.41% of dividends paid qualify for the dividends received deduction.
41
| | |
| | |
| | |
INTERMEDIATE BOND PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman | | Nancy P. Jacklin(1) |
John H. Dobkin(1) Michael J. Downey(1) | | Robert M. Keith, President and Chief Executive Officer |
William H. Foulk, Jr.(1) | | Garry L. Moody(1) |
D. James Guzy(1) | | Earl D. Weiner(1) |
| | |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Paul J. DeNoon(2), Vice President Shawn E. Keegan(2), Vice President Alison M. Martier(2), Vice President Douglas J. Peebles(2), Vice President | | Greg J. Wilensky(2), Vice President Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
CUSTODIANAND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Adviser’s U.S. Core Fixed Income Investment Team. Mr. Paul J. DeNoon, Mr. Shawn E. Keegan, Mr. Douglas J. Peebles, Ms. Alison M. Martier and Mr. Greg J. Wilensky are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
42
| | |
| | |
INTERMEDIATE BOND PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS |
| | | | | | | | |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007 and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999–June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
43
| | |
INTERMEDIATE BOND PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ##
78
(2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ##
66
(2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
44
| | |
INTERMEDIATE BOND PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS* AGE (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIPS HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ##
62
(2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ##
75
(2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund as defined in the “1940 Act”, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
45
| | |
INTERMEDIATE BOND PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS*, AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Paul J. DeNoon 52 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Shawn E. Keegan 43 | | Vice President | | Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Alison M. Martier 58 | | Vice President | | Senior Vice President of the Adviser**, with which she has been associated since prior to 2010. |
| | | | |
Douglas J. Peebles 49 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Greg J. Wilensky 47 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
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Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
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Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABI and ABIS are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
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INTERMEDIATE BOND PORTFOLIO | | |
CONTINUANCE DISCLOSURE | | AllianceBernstein Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE PORTFOLIO’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”) approved the continuance of the Fund’s Advisory Agreement with the Adviser in respect of AllianceBernstein Intermediate Bond Portfolio (the “Portfolio”) at a meeting held on November 3-6, 2014.
Prior to approval of the continuance of the Advisory Agreement, the directors had requested from the Adviser, and received and evaluated, extensive materials. They reviewed the proposed continuance of the Advisory Agreement with the Adviser and with experienced counsel who are independent of the Adviser, who advised on the relevant legal standards. The directors also reviewed an independent evaluation prepared by the Fund’s Senior Officer (who is also the Fund’s Independent Compliance Officer) of the reasonableness of the advisory fee, in which the Senior Officer concluded that the contractual fee for the Portfolio was reasonable. The directors also discussed the proposed continuance in private sessions with counsel and the Fund’s Senior Officer.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Portfolio gained from their experience as directors or trustees of most of the registered investment companies advised by the Adviser, their overall confidence in the Adviser’s integrity and competence they have gained from that experience, the Adviser’s initiative in identifying and raising potential issues with the directors and its responsiveness, frankness and attention to concerns raised by the directors in the past, including the Adviser’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the AllianceBernstein Funds. The directors noted that they have four regular meetings each year, at each of which they receive presentations from the Adviser on the investment results of the Portfolio and review extensive materials and information presented by the Adviser.
The directors also considered all other factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and different directors may have attributed different weights to the various factors. The directors determined that the selection of the Adviser to manage the Portfolio and the overall arrangements between the Portfolio and the Adviser, as provided in the Advisory Agreement, including the advisory fee, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their business judgment. The material factors and conclusions that formed the basis for the directors’ determinations included the following:
Nature, Extent and Quality of Services Provided
The directors considered the scope and quality of services provided by the Adviser under the Advisory Agreement, including the quality of the investment research capabilities of the Adviser and the other resources it has dedicated to performing services for the Portfolio. They noted the professional experience and qualifications of the Portfolio’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Portfolio will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Portfolio by employees of the Adviser or its affiliates. Requests for these reimbursements are made on a quarterly basis and subject to approval by the directors. Reimbursements, to the extent requested and paid, result in a higher rate of total compensation from the Portfolio to the Adviser than the fee rate stated in the Portfolio’s Advisory Agreement. The directors noted that the methodology used to determine the reimbursement amounts had been reviewed by an independent consultant retained by the Fund’s Senior Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Portfolio’s other service providers, also were considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Portfolio under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues, expenses and related notes indicating the profitability of the Portfolio to the Adviser for calendar years 2012 and 2013 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s Senior Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and understood that there are a number of potentially acceptable allocation methodologies for information of this type. The directors noted that the profitability information reflected all revenues and expenses of the Adviser’s relationship with the Portfolio, including those relating to its subsidiaries which provide transfer agency, distribution and brokerage services to the Portfolio. The directors recognized that it is difficult to make comparisons of profitability of the Advisory Agreement with advisory contracts for
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INTERMEDIATE BOND PORTFOLIO | | |
CONTINUANCE DISCLOSURE | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
unaffiliated funds because comparative information is not generally publicly available and is affected by numerous factors. The directors focused on the profitability of the Adviser’s relationship with the Portfolio before taxes and distribution expenses. The directors concluded that they were satisfied that the Adviser’s level of profitability from its relationship with the Portfolio was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Portfolio, including, but not limited to, benefits relating to 12b-1 fees and sales charges received by the Fund’s principal underwriter (which is a wholly owned subsidiary of the Adviser) in respect of the Portfolio’s Class B shares; and transfer agency fees paid by the Portfolio to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s profitability would be somewhat lower without these benefits. The directors also understood that the Adviser also might derive reputational and other benefits from its association with the Portfolio.
Investment Results
In addition to the information reviewed by the directors in connection with the meeting, the directors receive detailed performance information for the Portfolio at each regular Board meeting during the year. At the November 2014 meeting, the directors reviewed information prepared by Lipper showing the performance of the Class A Shares of the Portfolio as compared with that of a group of similar funds selected by Lipper (the “Performance Group”) and as compared with that of a broad array of funds selected by Lipper (the “Performance Universe”), and information prepared by the Adviser showing performance of the Class A Shares as compared with the Barclays U.S. Aggregate Bond Index (the “Index”), in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2014 and (in the case of comparisons with the Index) the period since inception (September 1992 inception). The directors noted that the Portfolio was in the 3rd quintile of the Performance Group and 4th quintile of the Performance Universe for the 1-year period, in the 4th quintile of the Performance Group and 5th quintile of the Performance Universe for the 3-year period, and in the 2nd quintile of the Performance Group and 3rd quintile of the Performance Universe for the 5- and 10-year periods. The Portfolio outperformed the Index in the 1-, 3- and 5-year periods, matched it in the 10-year period, and lagged it in the period since inception. Based on their review, the directors concluded that the Portfolio’s performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Portfolio to the Adviser and information prepared by Lipper concerning advisory fee rates paid by other funds in the same Lipper category as the Portfolio at a common asset level. The directors recognized that it is difficult to make comparisons of advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors noted that, at the Portfolio’s current size, its contractual effective advisory fee rate of 45 basis points was lower than the Expense Group median. The directors noted that the administrative expense reimbursement was 5.6 basis points in the Portfolio’s latest fiscal year, and that as a result the rate of total compensation received by the Adviser from the Portfolio pursuant to the Advisory Agreement was close to the Expense Group median.
The directors also considered the Adviser’s advisory fee schedule for non-fund clients pursuing a substantially similar investment style. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and the evaluation from the Fund’s Senior Officer. The directors noted that the institutional fee schedule and the Portfolio’s fee schedule started at different rates and that the institutional fee schedule had breakpoints at lower asset levels. The application of the institutional fee schedule to the Portfolio’s net assets would result in a fee rate lower than the rate being paid under the Portfolio’s Advisory Agreement. The directors noted that the Adviser may, in some cases, agree to fee rates with large institutional clients that are lower than those on the schedule reviewed by the directors and that they had previously discussed with the Adviser its policies in respect of such arrangements. The directors also reviewed information that indicated that the Portfolio’s fee rate is higher than the sub-advisory fee rate earned by the Adviser for sub-advising another registered investment company with a similar investment style. The directors noted that the Adviser advises a portfolio of another AllianceBernstein fund with a similar investment style for the same fee schedule as the Portfolio.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Portfolio relative to institutional clients and sub-advised funds. The Adviser also noted that because mutual funds are constantly issuing and redeeming shares, they are more difficult to manage than an institutional account, where the assets tend to be relatively stable. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to funds
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| | AllianceBernstein Variable Products Series Fund |
such as the Portfolio, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors also considered the total expense ratio of the Class A shares of the Portfolio in comparison to the fees and expenses of funds within two comparison groups created by Lipper: an Expense Group and an Expense Universe. Lipper described an Expense Group as a representative sample of funds comparable to the Portfolio and an Expense Universe as a broader group, consisting of all funds in the Portfolio’s investment classification/objective. The Class A expense ratio of the Portfolio was based on the Portfolio’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Portfolio’s Lipper category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view the expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Portfolio by others.
The directors noted that the Portfolio’s total expense ratio was higher than the Expense Group and the Expense Universe medians. After discussing with the Adviser the reasons for the Portfolio’s expense ratio, the directors concluded that the Portfolio’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Portfolio contains breakpoints that reduce the fee rates on assets above specified levels. The directors took into consideration prior presentations by an independent consultant on economies of scale in the mutual fund industry and for the AllianceBernstein Funds, and by the Adviser concerning certain of its views on economies of scale. The directors also had requested and received from the Adviser certain updates on economies of scale at the May 2014 meeting. The directors believe that economies of scale may be realized (if at all) by the Adviser across a variety of products and services, and not only in respect of a single fund. The directors noted that there is no established methodology for setting breakpoints that give effect to fund-specific services provided by a fund’s adviser and to the economies of scale that an adviser may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund’s operations. The directors observed that in the mutual fund industry as a whole, as well as among funds similar to the Portfolio, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. The directors also noted that the advisory agreements for many funds do not have breakpoints at all. Having taken these factors into account, the directors concluded that the Portfolio’s shareholders would benefit from a sharing of economies of scale in the event the Portfolio’s net assets exceed a breakpoint in the future.
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INTERMEDIATE BOND PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS.
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”), in respect of AllianceBernstein Intermediate Bond Portfolio (the “Portfolio”),2,3 prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by the August 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of this summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement.
The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the Assurance of Discontinuance between the NYAG and the Adviser. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what Section 36(b) requires: to face liability under Section 36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of Section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”4
INVESTMENT ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.5 Also shown are the Portfolio’s net assets on September 30, 2014.
1 | | The information in the fee evaluation was completed on October 23, 2014 and discussed with the Board of Directors on November 4-6, 2014. |
2 | | Future references to the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratios refer to Class A shares of the Portfolio. |
3 | | On April 25, 2008, the Adviser’s variable fixed-income offerings were reorganized and U.S. Government/ High Grade Securities Portfolio acquired the assets of other fixed income series of the Fund, including Americas Government Income Portfolio, Global Bond Portfolio, Global Dollar Government Portfolio and High Yield Portfolio. On April 28, 2008 the investment guidelines of U.S. Government/ High Grade Securities Portfolio were broadened to match those of the Adviser’s U.S. Strategic Core Plus Strategy and the Portfolio’s name was changed to Intermediate Bond Portfolio. |
4 | | Jones v. Harris at 1427. |
5 | | Most of the AllianceBernstein Mutual Funds, which the Adviser manages, were affected by the Adviser’s settlement with the NYAG. |
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Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets ($MM) |
Intermediate Bond Portfolio | | Low Risk Income | | 0.45% on 1st $2.5 billion 0.40% on next $2.5 billion 0.35% on the balance | | $78.7 |
The Portfolio’s Investment Advisory Agreement provides for the Adviser to be reimbursed for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s the fiscal year ended December 31, 2013, the Adviser received $54,102 (0.056% of the Portfolio’s average daily net assets) for providing such services.
Set forth below are the Portfolio’s total expense ratios for the most recent annual period:
| | | | |
Portfolio | | Total Expense Ratio6 | | Fiscal Year |
Intermediate Bond Portfolio | | Class A 0.77% Class B 1.02% | | December 31 |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund since establishing a new mutual fund requires a large upfront investment and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. Finally, in recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts with a similar investment style as the Portfolio.7 In addition to the AllianceBernstein Institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein Institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on September 30, 2014 net assets.8
7 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
8 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
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INTERMEDIATE BOND PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | |
Portfolio | | Net Assets 9/30/14 ($MM) | | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee (%) | | | Fund Advisory Fee (%) | |
Intermediate Bond Portfolio | | $ | 78.7 | | | U.S. Strategic Core Plus 0.50% on the first $30 million 0.20% on the balance Minimum Account Size: $25 million | | | 0.314 | | | | 0.450 | |
Certain of the AllianceBernstein Mutual Funds (“ABMF”), which the Adviser manages, have a similar investment style as the Portfolio and their fee schedules are set forth below. The AllianceBernstein Mutual Funds were also affected by the Adviser’s settlement with the NYAG. As a result, the Portfolio has the same breakpoints as AllianceBernstein Bond Fund, Inc. – Intermediate Bond Portfolio. Sanford C. Bernstein Fund II, Inc. – Intermediate Duration Institutional Portfolio, which is managed similarly as the Portfolio, was not affected by the settlement since the fund has lower breakpoints than the NYAG related fee schedule. Also shown are what would have been the effective advisory fees of the Portfolio had the ABMF fee schedules been applicable to the Portfolio based on September 30, 2014 net assets:
| | | | | | | | | | | | |
Portfolio | | ABMF Fund | | Fee Schedule | | ABMF Effective Fee (%) | | | Portfolio Advisory Fee (%) | |
Intermediate Bond Portfolio | | Bond Fund, Inc. – Intermediate Bond Portfolio | | 0.45% on first $2.5 billion 0.40% on next $2.5 billion 0.35% on the balance
| | | 0.450 | | | | 0.450 | |
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Intermediate Bond Portfolio | | Intermediate Duration Institutional Portfolio9 | | 0.50% on first $1 billion 0.45% on the balance | | | 0.500 | | | | 0.450 | |
The Adviser manages Intermediate Duration Portfolio of the Sanford C. Bernstein Fund, Inc. (“SCB Fund”), an open-end management investment company which has a similar investment style as the Portfolio. Set forth below is Intermediate Duration Portfolio’s advisory fee and what would havebeen theeffectiveadvisory feeofthe Portfolio had the fee schedule of Intermediate Duration Portfolio been applicable to the Portfolio based on September 30, 2014 net assets:
| | | | | | | | | | | | |
Portfolio | | SCB Fund Portfolio | | Fee Schedule | | SCB Fund Effective Fee (%) | | | Portfolio Advisory Fee (%) | |
Intermediate Bond Portfolio | | Intermediate Duration Portfolio | | 0.50% on 1st $1 billion 0.45% on next $ 2 billion 0.40% on next $ 2 billion 0.35% on next $ 2 billion 0.30% the balance
| | | 0.500 | | | | 0.450 | |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families. The Adviser charges the fee set forth below for the sub-advisory relationship that has a somewhat similar investment style as the Portfolio. Also shown are the Portfolio’s advisory fee and what would have been the effective advisory fee of the Portfolio had the fee schedule of the sub-advisory relationship been applicable to the Portfolio based on September 30, 2014 net assets:
| | | | | | | | | | | | |
Portfolio | | | | Fee Schedule | | Effective Sub-Adv. Fee (%) | | | Portfolio Advisory Fee (%) | |
Intermediate Bond Portfolio | | Client # 1 | | AB Sub-Advisory Fee Schedule: 0.29% on first $100 million 0.20% thereafter | | | 0.290 | | | | 0.450 | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser. In addition, to the extent that this is the only sub-advisory relationship and it is with an affiliate of the Adviser, the fee schedule may not reflect arm’s-length bargaining or negotiations.
9 | | Intermediate Duration Institutional Portfolio has an expense cap of 0.45%, which effectively reduces the advisory fee of the fund. |
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While it appears that the sub-advisory relationship is paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such a lower fee due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationship. There could be various business reasons why an investment adviser would be willing to provide a sub-advised relationship investment related services at a different fee level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management service generally required by a registered investment company.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.10 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”)11 and the Portfolio’s contractual management fee ranking.12
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
The Portfolio’s original EG had an insufficient number of peers. Consequently, Lipper expanded the Portfolio’s EG to include peers that have a similar but not the same Lipper classification/objective as the Portfolio. However, because Lipper had expanded the Portfolio’s EG, under Lipper’s standard guidelines, the Portfolio’s Lipper Expense Universe (“EU”) was also expanded to include universes of those peers that had a similar but not the same Lipper investment objective/classification. A “normal” EU will include funds that have the same investment objective/classification as the subject portfolio.13
| | | | | | | | |
Portfolio | | Contractual Management Fee (%)14 | | Lipper Exp. Group Median (%) | | Lipper Group Rank | |
Intermediate Bond Portfolio | | 0.450 | | 0.500 | | | 2/11 | |
Set forth below is a comparison of the Portfolio’s total expense ratio and the medians of the Portfolio’s EG and EU.
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Total Expense Ratio (%)15 | | | Lipper Exp. Group Median (%) | | | Lipper Group Rank | | | Lipper Exp. Universe Median (%) | | | Lipper Universe Rank | |
Intermediate Bond Portfolio | | | 0.768 | | | | 0.657 | | | | 10/11 | | | | 0.620 | | | | 22/23 | |
Based on this analysis, the Portfolio has more favorable ranking on a contractual management fee basis than on a total expense basis.
10 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
11 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratios than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
12 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
13 | | Except for asset size comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
14 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative, and other services. |
15 | | Most recently completed fiscal year Class A share total expense ratio. |
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SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio decreased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive and the relationship otherwise complies with the 40 Act restrictions. These affiliates provide transfer agent and distribution services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments and front-end sales loads.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $65,150 in Rule 12b-1 fees from the Portfolio.
During the fiscal year ended December 31, 2013, distribution expenses were incurred by ABI in the amount of $115,278 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI, is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Adviser and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, and payments related to providing contract-holder record-keeping and/or administrative services. Payments related to providing contract-holder record keeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the firm over the year. With respect to the Fund,16 ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”), an affiliate of the Adviser. During the most recently completed fiscal year, the Portfolio paid ABIS a fee of approximately $1,385.17
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base
16 | | The fee is inclusive of other Portfolios of the Fund (Equity and Multi-Asset), which are not discussed in this summary. |
17 | | The Fund (which includes the Portfolio and other Portfolios of the Fund) paid ABIS a flat fee of $18,000 in 2013. |
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| | AllianceBernstein Variable Products Series Fund |
compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously, in February 2008, the independent consultant provided the Board of Directors an update of the Deli18 study on advisory fees and various fund characteristics.19 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.20 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE FUND
With assets under management of approximately $473 billion as of September 30, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance rankings21 of the Portfolio relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)22 for the periods ended July 31, 2014.23
| | | | | | | | | | | | | | | | | | | | |
| | Fund Return (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Intermediate Bond Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 4.85 | | | | 4.85 | | | | 5.55 | | | | 3/5 | | | | 8/10 | |
3 year | | | 3.41 | | | | 3.80 | | | | 4.26 | | | | 4/5 | | | | 9/10 | |
5 year | | | 6.02 | | | | 5.88 | | | | 5.95 | | | | 2/5 | | | | 5/10 | |
10 year | | | 4.83 | | | | 4.43 | | | | 4.83 | | | | 2/5 | | | | 5/9 | |
18 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry since 2008. |
19 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
20 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
21 | | The performance returns and rankings of the Portfolio are for the Portfolio’s Class A shares. The performance returns of the Portfolio were provided by Lipper. |
22 | | The Portfolio’s PG/PU is not identical to its respective EG/EU as the criteria for including/excluding a fund to/from PG/PU is somewhat different than that of EG/EU. |
23 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the Portfolio even if a Portfolio had a different investment classification/objective at a different point in time. |
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INTERMEDIATE BOND PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Set forth below are the 1, 3, 5 and 10 year and since inception performance returns of the Portfolio (in bold)24 versus its benchmarks.25 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.26
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending July 31, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
Intermediate Bond Portfolio27 | | | 4.85 | | | | 3.41 | | | | 6.02 | | | | 4.83 | | | | 5.39 | | | | 3.06 | | | | 1.88 | | | | 5 | |
Barclays Capital U.S. Aggregate Index | | | 3.97 | | | | 3.04 | | | | 4.47 | | | | 4.80 | | | | 5.86 | | | | 2.79 | | | | 1.54 | | | | 5 | |
Inception Date: September 17, 1992 | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: November 18, 2014
24 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
25 | | The Adviser provided Portfolio and benchmark performance return information for periods through July 31, 2014. |
26 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. A Sharpe Ratio is a risk adjusted measure of return that divides a fund’s return in excess of the riskless return by the fund’s standard deviation. A fund with a greater volatility would be viewed as more risky than a fund with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky fund. A fund with a higher Sharpe Ratio would be viewed as better performing than a fund with a lower Sharpe Ratio. |
27 | | On or around April 25, 2008, the Portfolio’s name was changed from U.S. Government/U.S. High Grade Portfolio to Intermediate Bond Portfolio. Also at this time, the Portfolio’s strategy and the benchmark changed from Barclays Capital U.S. Government Index to Barclays Capital U.S. Aggregate Index. |
56
VPS-IB-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | INTERNATIONAL GROWTH PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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INTERNATIONAL GROWTH | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—International Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in an international portfolio of equity securities of companies selected by AllianceBernstein L.P. (the “Adviser”) for their growth potential within various market sectors. Examples of the types of market sectors in which the Portfolio may invest include, but are not limited to, information technology (which includes telecommunications), health care, financial services, infrastructure, energy and natural resources, and consumer groups.
Under normal market conditions, the Portfolio invests significantly (at least 40%—unless market conditions are not deemed favorable by the Adviser) in securities of non-U.S. companies. In addition, the Portfolio invests, under normal circumstances, in the equity securities of companies located in at least three countries (and normally substantially more) other than the United States. The Portfolio invests in securities of companies in both developed and emerging-market countries. Geographic distribution of the Portfolio’s investments among countries or regions also will be a product of the stock selection process rather than a pre-determined allocation.
The Portfolio may also invest in synthetic foreign equity securities, which are various types of warrants used internationally that entitle a holder to buy or sell underlying securities. The Adviser expects that normally the Portfolio’s portfolio will tend to emphasize investments in larger capitalization companies, although the Portfolio may invest in smaller- or medium-capitalization companies.
The Portfolio may, at times, invest in shares of exchange-traded funds (“ETFs”) in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
Currencies can have a dramatic impact on equity returns, significantly adding to returns in some years and greatly diminishing them in others. Currency and equity positions are evaluated separately. The Adviser may seek to hedge the currency exposure resulting from securities positions when it finds the currency exposure unattractive. To hedge all or a portion of its currency risk, the Portfolio may, from time to time, invest in currency-related derivatives, including forward currency exchange contracts, futures, options on futures, swaps and options. The Adviser may also seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives.
The Portfolio may enter into other derivatives transactions, such as options, futures contracts, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of ETFs. These transactions may be used, for example, in an effort to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Portfolio’s portfolio from a decline in value, sometimes within certain ranges.
INVESTMENT RESULTS
The table on page 5 shows the Portfolio’s performance compared to its benchmarks, the Morgan Stanley Capital International (“MSCI”) All Country (“AC”) World (ex-U.S.) Index (net) and the MSCI World (ex-U.S.) Index (net) for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio outperformed the benchmarks for the annual period. Security selection and sector allocation combined to drive the outperformance; currency positioning also contributed. Stock selection in the consumer staples sector and underweight exposure to the energy sector contributed. Stock selection in consumer discretionary and energy detracted.
The Portfolio utilized derivatives in the form of currency forwards for hedging purposes, and futures for investment purposes, which added to performance.
MARKET REVIEW AND INVESTMENT STRATEGY
International equity markets were under pressure in 2014, as a challenging global economic outlook curbed investor risk appetites. In Europe, the eurozone continued to be burdened by sluggish growth and the looming specter of deflation, leading to speculation in the closing months of the year that the European Central Bank would implement a quantitative easing program similar to the one employed by the U.S. In Asia, fears that Japan’s economic recovery was faltering prompted the Bank of Japan to inject more liquidity into global markets by significantly increasing its purchase of Japanese government assets, which lifted world equity markets temporarily. Data would indicate that
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| | AllianceBernstein Variable Products Series Fund |
Japan’s economy, the world’s third largest, had in fact slipped into a recession in the third quarter. Additionally, in emerging Asia, data released during the period continued to suggest that China’s economy, the world’s second largest, was weakening. Despite the discouraging numbers, China’s equity markets rose for the year on hopes that the country’s policymakers would soon implement more stimulus measures to jump-start growth. Concerns about the dimming global economic outlook led to a steep drop in commodity prices, especially crude oil, and negatively impacted the economies of countries that rely heavily on exporting raw materials, including Australia, Brazil and Russia.
The International Growth Portfolio Team follows a bottom-up stock selection methodology that employs rigorous analysis across geographic borders in search of companies that are market leaders with attractive earnings growth prospects and high return on invested capital.
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INTERNATIONAL GROWTH PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged MSCI World AC (ex-U.S.) Index and the unmanaged MSCI World (ex-U.S.) Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI AC World (ex-U.S.) Index (free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets, excluding the U.S. The MSCI World (ex-U.S.) Index (free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets, excluding the U.S. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk: Investments in emerging-market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Leverage Risk: To the extent the Portfolio uses leveraging techniques, its net asset value (“NAV”) may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Portfolio’s investments.
Management Risk: The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
(Disclosures, Risks and Note about Historical Performance continued on next page)
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INTERNATIONAL GROWTH PORTFOLIO |
DISCLOSURESAND RISKS | | |
(continued from previous page) | | AllianceBernstein Variable Products Series Fund |
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
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INTERNATIONAL GROWTH PORTFOLIO |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
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THE PORTFOLIO VS. ITS BENCHMARKS | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
International Growth Portfolio Class A | | | -1.19% | | | | 4.26% | | | | 4.78% | |
International Growth Portfolio Class B | | | -1.41% | | | | 4.01% | | | | 4.52% | |
MSCI AC World (ex-U.S.) Index (net) | | | -3.87% | | | | 4.43% | | | | 5.13% | |
MSCI World (ex-U.S.) Index (net) | | | -4.32% | | | | 5.21% | | | | 4.64% | |
* Average annual returns. | | | | | | | | | | | | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.94% and 1.19% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
INTERNATIONAL GROWTH PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in International Growth Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmarks, the MSCI AC World (ex-U.S.) Index (net) and the MSCI World (ex-U.S.) Index (net). The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 3-4.
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INTERNATIONAL GROWTH PORTFOLIO |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 936.10 | | | $ | 5.71 | | | | 1.17 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.31 | | | $ | 5.96 | | | | 1.17 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 935.40 | | | $ | 6.93 | | | | 1.42 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.05 | | | $ | 7.22 | | | | 1.42 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
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INTERNATIONAL GROWTH PORTFOLIO |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Roche Holding AG | | $ | 2,942,432 | | | | 3.4 | % |
Prudential PLC | | | 2,508,926 | | | | 2.9 | |
AIA Group Ltd. | | | 2,440,353 | | | | 2.8 | |
Nestle SA | | | 2,218,523 | | | | 2.6 | |
British American Tobacco PLC | | | 2,086,731 | | | | 2.4 | |
Housing Development Finance Corp. Ltd. | | | 2,030,751 | | | | 2.3 | |
Partners Group Holding AG | | | 1,911,456 | | | | 2.2 | |
Anheuser-Busch InBev NV | | | 1,877,414 | | | | 2.2 | |
Cie Financiere Richemont SA | | | 1,868,214 | | | | 2.1 | |
Taiwan Semiconductor Manufacturing Co., Ltd. | | | 1,819,460 | | | | 2.1 | |
| | | | | | | | |
| | $ | 21,704,260 | | | | 25.0 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 22,867,828 | | | | 26.4 | % |
Consumer Discretionary | | | 15,341,867 | | | | 17.7 | |
Consumer Staples | | | 13,535,916 | | | | 15.6 | |
Health Care | | | 10,965,031 | | | | 12.7 | |
Information Technology | | | 9,316,412 | | | | 10.8 | |
Industrials | | | 7,311,233 | | | | 8.4 | |
Energy | | | 4,268,018 | | | | 4.9 | |
Materials | | | 2,216,513 | | | | 2.6 | |
Short-Term Investments | | | 762,623 | | | | 0.9 | |
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Total Investments | | $ | 86,585,441 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
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INTERNATIONAL GROWTH PORTFOLIO |
COUNTRY BREAKDOWN* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
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COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
United Kingdom | | $ | 13,511,541 | | | | 15.6 | % |
Switzerland | | | 11,254,088 | | | | 13.0 | |
Japan | | | 9,813,450 | | | | 11.3 | |
France | | | 5,864,925 | | | | 6.8 | |
India | | | 4,978,304 | | | | 5.7 | |
Hong Kong | | | 4,742,575 | | | | 5.5 | |
China | | | 4,628,694 | | | | 5.3 | |
Germany | | | 3,611,978 | | | | 4.2 | |
Taiwan | | | 3,476,727 | | | | 4.0 | |
South Africa | | | 3,195,247 | | | | 3.7 | |
Italy | | | 2,736,570 | | | | 3.1 | |
United States | | | 2,137,770 | | | | 2.5 | |
Belgium | | | 1,877,414 | | | | 2.2 | |
Other | | | 13,993,535 | | | | 16.2 | |
Short-Term Investments | | | 762,623 | | | | 0.9 | |
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Total Investments | | $ | 86,585,441 | | | | 100.0 | % |
* | | All data are as of December 31, 2014. The Portfolio’s country breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. “Other” country weightings represent 2.0% or less in the following countries: Australia, Austria, Brazil, Canada, Denmark, Indonesia, Mexico, Netherlands, Peru, Philippines, Russia, Singapore, Sweden and Thailand. |
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INTERNATIONAL GROWTH PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.8% | | | | | | | | |
FINANCIALS–26.3% | | | | | | | | |
BANKS–6.8% | | | | | | | | |
Credicorp Ltd. | | | 8,500 | | | $ | 1,361,530 | |
ING Groep NV(a) | | | 106,550 | | | | 1,376,590 | |
Kasikornbank PCL (NVDR) | | | 120,500 | | | | 833,407 | |
Sumitomo Mitsui Financial Group, Inc. | | | 29,800 | | | | 1,077,350 | |
UniCredit SpA | | | 198,400 | | | | 1,270,873 | |
| | | | | | | | |
| | | | | | | 5,919,750 | |
| | | | | | | | |
CAPITAL MARKETS–6.9% | | | | | | | | |
Aberdeen Asset Management PLC | | | 215,750 | | | | 1,441,631 | |
Azimut Holding SpA | | | 40,095 | | | | 871,040 | |
Partners Group Holding AG | | | 6,570 | | | | 1,911,456 | |
UBS Group AG(a) | | | 102,840 | | | | 1,767,789 | |
| | | | | | | | |
| | | | | | | 5,991,916 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–2.6% | | | | | | | | |
IG Group Holdings PLC | | | 111,938 | | | | 1,250,858 | |
London Stock Exchange Group PLC | | | 28,840 | | | | 992,355 | |
| | | | | | | | |
| | | | | | | 2,243,213 | |
| | | | | | | | |
INSURANCE–6.6% | | | | | | | | |
AIA Group Ltd. | | | 444,000 | | | | 2,440,353 | |
Prudential PLC | | | 108,520 | | | | 2,508,926 | |
St James’s Place PLC | | | 63,800 | | | | 804,447 | |
| | | | | | | | |
| | | | | | | 5,753,726 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–1.1% | | | | | | | | |
Global Logistic Properties Ltd. | | | 498,000 | | | | 928,472 | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–2.3% | | | | | | | | |
Housing Development Finance Corp. Ltd. | | | 113,540 | | | | 2,030,751 | |
| | | | | | | | |
| | | | | | | 22,867,828 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–17.7% | | | | | | | | |
AUTOMOBILES–4.8% | | | | | | | | |
Great Wall Motor Co., Ltd.–Class H | | | 125,000 | | | | 709,463 | |
Nissan Motor Co., Ltd. | | | 151,900 | | | | 1,324,836 | |
Tata Motors Ltd.–Class A | | | 203,420 | | | | 1,076,783 | |
Volkswagen AG (Preference Shares) | | | 4,866 | | | | 1,081,495 | |
| | | | | | | | |
| | | | | | | 4,192,577 | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–0.7% | | | | | | | | |
Kroton Educacional SA | | | 107,100 | | | | 624,501 | |
| | | | | | | | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–1.8% | | | | | | | | |
Alsea SAB de CV(a)(b) | | | 208,911 | | | $ | 574,749 | |
Melco Crown Entertainment Ltd. (ADR) | | | 38,860 | | | | 987,044 | |
| | | | | | | | |
| | | | | | | 1,561,793 | |
| | | | | | | | |
HOUSEHOLD DURABLES–1.5% | | | | | | | | |
Panasonic Corp. | | | 106,800 | | | | 1,257,937 | |
| | | | | | | | |
INTERNET & CATALOG RETAIL–1.1% | | | | | | | | |
JD.com, Inc. (ADR)(a) | | | 39,338 | | | | 910,281 | |
| | | | | | | | |
MEDIA–1.7% | | | | | | | | |
Naspers Ltd.–Class N | | | 11,050 | | | | 1,429,374 | |
| | | | | | | | |
MULTILINE RETAIL–0.9% | | | | | | | | |
Matahari Department Store Tbk PT | | | 675,000 | | | | 813,349 | |
| | | | | | | | |
SPECIALTY RETAIL–2.4% | | | | | | | | |
Chow Tai Fook Jewellery Group Ltd.(b) | | | 554,600 | | | | 742,772 | |
Fast Retailing Co., Ltd. | | | 3,700 | | | | 1,346,412 | |
| | | | | | | | |
| | | | | | | 2,089,184 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–2.8% | | | | | | | | |
Brunello Cucinelli SpA(b) | | | 26,623 | | | | 594,657 | |
Cie Financiere Richemont SA | | | 21,072 | | | | 1,868,214 | |
| | | | | | | | |
| | | | | | | 2,462,871 | |
| | | | | | | | |
| | | | | | | 15,341,867 | |
| | | | | | | | |
CONSUMER STAPLES–15.6% | | | | | | | | |
BEVERAGES–2.2% | | | | | | | | |
Anheuser-Busch InBev NV | | | 16,682 | | | | 1,877,414 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–1.6% | | | | | | | | |
Magnit PJSC (Sponsored GDR)(c) | | | 13,840 | | | | 628,336 | |
Tsuruha Holdings, Inc. | | | 12,900 | | | | 746,434 | |
| | | | | | | | |
| | | | | | | 1,374,770 | |
| | | | | | | | |
FOOD PRODUCTS–6.2% | | | | | | | | |
Danone SA | | | 22,240 | | | | 1,454,008 | |
Nestle SA | | | 30,432 | | | | 2,218,523 | |
Universal Robina Corp. | | | 259,120 | | | | 1,129,734 | |
WH Group Ltd.(a)(c) | | | 1,006,000 | | | | 572,406 | |
| | | | | | | | |
| | | | | | | 5,374,671 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–3.2% | | | | | | | | |
Reckitt Benckiser Group PLC | | | 20,730 | | | | 1,679,005 | |
Unicharm Corp. | | | 47,700 | | | | 1,143,325 | |
| | | | | | | | |
| | | | | | | 2,822,330 | |
| | | | | | | | |
TOBACCO–2.4% | | | | | | | | |
British American Tobacco PLC | | | 38,507 | | | | 2,086,731 | |
| | | | | | | | |
| | | | | | | 13,535,916 | |
| | | | | | | | |
9
| | |
INTERNATIONAL GROWTH PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
HEALTH CARE–12.6% | | | | | | | | |
BIOTECHNOLOGY–0.6% | | | | | | | | |
Actelion Ltd. (REG)(a) | | | 4,740 | | | $ | 545,674 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–2.0% | | | | | | | | |
Elekta AB–Class B | | | 64,150 | | | | 655,856 | |
Essilor International SA | | | 9,600 | | | | 1,070,585 | |
| | | | | | | | |
| | | | | | | 1,726,441 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–0.7% | | | | | | | | |
Life Healthcare Group Holdings Ltd. | | | 173,170 | | | | 639,715 | |
| | | | | | | | |
PHARMACEUTICALS–9.3% | | | | | | | | |
Aspen Pharmacare Holdings Ltd. | | | 32,281 | | | | 1,126,158 | |
Bayer AG | | | 8,267 | | | | 1,126,861 | |
H Lundbeck A/S | | | 30,270 | | | | 600,840 | |
Indivior PLC(a) | | | 20,730 | | | | 48,271 | |
Novo Nordisk A/S–Class B | | | 27,145 | | | | 1,148,227 | |
Roche Holding AG | | | 10,860 | | | | 2,942,432 | |
Sun Pharmaceutical Industries Ltd. | | | 81,100 | | | | 1,060,412 | |
| | | | | | | | |
| | | | | | | 8,053,201 | |
| | | | | | | | |
| | | | | | | 10,965,031 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–10.7% | | | | | | | | |
INTERNET SOFTWARE & SERVICES–3.5% | | | | | | | | |
Baidu, Inc. (Sponsored ADR)(a) | | | 7,620 | | | | 1,737,132 | |
Tencent Holdings Ltd. | | | 87,900 | | | | 1,271,818 | |
| | | | | | | | |
| | | | | | | 3,008,950 | |
| | | | | | | | |
IT SERVICES–0.9% | | | | | | | | |
Tata Consultancy Services Ltd. | | | 19,950 | | | | 810,358 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–5.7% | | | | | | | | |
ams AG | | | 40,320 | | | | 1,457,567 | |
MediaTek, Inc. | | | 114,000 | | | | 1,657,267 | |
Taiwan Semiconductor Manufacturing Co., Ltd. | | | 413,000 | | | | 1,819,460 | |
| | | | | | | | |
| | | | | | | 4,934,294 | |
| | | | | | | | |
SOFTWARE–0.6% | | | | | | | | |
Mobileye NV(a)(b) | | | 13,876 | | | | 562,810 | |
| | | | | | | | |
| | | | | | | 9,316,412 | |
| | | | | | | | |
INDUSTRIALS–8.4% | | | | | | | | |
AEROSPACE & DEFENSE–1.9% | | | | | | | | |
Safran SA | | | 27,470 | | | | 1,694,760 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–1.3% | | | | | | | | |
Aggreko PLC | | | 46,926 | | | | 1,094,314 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–1.6% | | | | | | | | |
Toshiba Corp. | | | 330,000 | | | | 1,391,709 | |
| | | | | | | | |
| | | | | | | | |
MACHINERY–1.8% | | | | | | | | |
Komatsu Ltd. | | | 69,000 | | | $ | 1,525,447 | |
| | | | | | | | |
PROFESSIONAL SERVICES–1.8% | | | | | | | | |
Capita PLC | | | 95,720 | | | | 1,605,003 | |
| | | | | | | | |
| | | | | | | 7,311,233 | |
| | | | | | | | |
ENERGY–4.9% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–1.8% | | | | | | | | |
Schlumberger Ltd. | | | 18,440 | | | | 1,574,960 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–3.1% | | | | | | | | |
Canadian Natural Resources Ltd. | | | 33,880 | | | | 1,047,486 | |
Total SA | | | 32,120 | | | | 1,645,572 | |
| | | | | | | | |
| | | | | | | 2,693,058 | |
| | | | | | | | |
| | | | | | | 4,268,018 | |
| | | | | | | | |
MATERIALS–2.6% | | | | | | | | |
CHEMICALS–1.6% | | | | | | | | |
Linde AG | | | 7,620 | | | | 1,403,621 | |
| | | | | | | | |
METALS & MINING–1.0% | | | | | | | | |
BHP Billiton PLC | | | 37,930 | | | | 812,892 | |
| | | | | | | | |
| | | | | | | 2,216,513 | |
| | | | | | | | |
Total Common Stocks (cost $65,174,781) | | | | | | | 85,822,818 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–0.9% | | | | | | | | |
TIME DEPOSIT–0.9% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $762,623) | | $ | 763 | | | | 762,623 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–99.7% (cost $65,937,404) | | | | | | | 86,585,441 | |
| | | | | | | | |
| | Shares | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–2.7% | | | | | | | | |
INVESTMENT COMPANIES–2.7% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(d)(e) (cost $2,295,104) | | | 2,295,104 | | | | 2,295,104 | |
| | | | | | | | |
TOTAL INVESTMENTS–102.4% (cost $68,232,508) | | | | | | | 88,880,545 | |
Other assets less liabilities–(2.4)% | | | | | | | (2,072,270 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 86,808,275 | |
| | | | | | | | |
10
| | |
| | AllianceBernstein Variable Products Series Fund |
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
BNP Paribas SA | | CHF | 4,831 | | | USD | 4,990 | | | | 2/18/15 | | | $ | 127,567 | |
Credit Suisse International | | USD | 1,925 | | | EUR | 1,550 | | | | 2/18/15 | | | | (48,669 | ) |
Goldman Sachs Bank USA | | USD | 4,190 | | | AUD | 4,905 | | | | 2/18/15 | | | | (198,393 | ) |
HSBC Bank USA | | GBP | 2,805 | | | USD | 4,459 | | | | 2/18/15 | | | | 88,979 | |
HSBC Bank USA | | HKD | 22,250 | | | USD | 2,870 | | | | 2/18/15 | | | | 814 | |
HSBC Bank USA | | USD | 2,820 | | | JPY | 323,143 | | | | 2/18/15 | | | | (121,413 | ) |
State Street Bank & Trust Co. | | USD | 503 | | | NOK | 3,457 | | | | 2/18/15 | | | | (39,306 | ) |
State Street Bank & Trust Co. | | USD | 791 | | | SEK | 5,869 | | | | 2/18/15 | | | | (38,099 | ) |
UBS AG | | USD | 3,111 | | | CAD | 3,564 | | | | 2/18/15 | | | | (46,134 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (274,654 | ) |
| | | | | | | | | | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the aggregate market value of these securities amounted to $1,200,742 or 1.4% of net assets. |
(d) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
(e) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
Currency Abbreviations:
AUD—Australian Dollar
CAD—Canadian Dollar
CHF—Swiss Franc
EUR—Euro
GBP—Great British Pound
HKD—Hong Kong Dollar
JPY—Japanese Yen
NOK—Norwegian Krone
SEK—Swedish Krona
USD—United States Dollar
Glossary:
ADR—American Depositary Receipt
GDR—Global Depositary Receipt
NVDR—Non Voting Depositary Receipt
PJSC—Public Joint Stock Company
REG—Registered Shares
See notes to financial statements.
11
| | |
INTERNATIONAL GROWTH PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $65,937,404) | | $ | 86,585,441 | (a) |
Affiliated issuers (cost $2,295,104—investment of cash collateral for securities loaned) | | | 2,295,104 | |
Foreign currencies, at value (cost $453,972) | | | 449,934 | |
Dividends and interest receivable | | | 309,526 | |
Unrealized appreciation on forward currency exchange contracts | | | 217,360 | |
Receivable for capital stock sold | | | 35,339 | |
| | | | |
Total assets | | | 89,892,704 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 2,295,104 | |
Unrealized depreciation on forward currency exchange contracts | | | 492,014 | |
Payable for capital stock redeemed | | | 96,756 | |
Advisory fee payable | | | 56,261 | |
Administrative fee payable | | | 12,310 | |
Distribution fee payable | | | 10,277 | |
Payable for foreign currency transactions | | | 994 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses and other liabilities | | | 120,601 | |
| | | | |
Total liabilities | | | 3,084,429 | |
| | | | |
NET ASSETS | | $ | 86,808,275 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 4,591 | |
Additional paid-in capital | | | 103,016,094 | |
Undistributed net investment income | | | 428,748 | |
Accumulated net realized loss on investment and foreign currency transactions | | | (36,959,936 | ) |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 20,318,778 | |
| | | | |
| | $ | 86,808,275 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 38,924,122 | | | | 2,044,226 | | | $ | 19.04 | |
B | | $ | 47,884,153 | | | | 2,546,345 | | | $ | 18.81 | |
(a) | | Includes securities on loan with a value of $2,181,730 (see Note E). |
See notes to financial statements.
12
| | |
INTERNATIONAL GROWTH PORTFOLIO |
STATEMENTOF OPERATIONS |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $172,856) | | $ | 2,304,672 | |
Affiliated issuers | | | 1,742 | |
Interest | | | 108 | |
Securities lending income | | | 53,423 | |
| | | | |
| | | 2,359,945 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 760,928 | |
Distribution fee—Class B | | | 129,152 | |
Transfer agency—Class A | | | 3,141 | |
Transfer agency—Class B | | | 3,515 | |
Custodian | | | 101,729 | |
Printing | | | 68,174 | |
Audit and tax | | | 61,133 | |
Administrative | | | 48,204 | |
Legal | | | 39,023 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 15,962 | |
| | | | |
Total expenses | | | 1,235,464 | |
| | | | |
Net investment income | | | 1,124,481 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 19,932,328 | (a) |
Futures | | | 649,603 | |
Foreign currency transactions | | | (1,555,476 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | (23,710,141 | )(b) |
Foreign currency denominated assets and liabilities | | | 1,184,024 | |
| | | | |
Net loss on investment and foreign currency transactions | | | (3,499,662 | ) |
| | | | |
Contributions from Adviser (see Note B) | | | 5,816 | |
| | | | |
NET DECREASE IN NET ASSETS FROM OPERATIONS | | $ | (2,369,365 | ) |
| | | | |
(a) | | Net of foreign cap gains tax of $1,314. |
(b) | | Net of increase in accrued foreign capital gains taxes of $30,747. |
See notes to financial statements.
13
| | |
|
INTERNATIONAL GROWTH PORTFOLIO |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 1,124,481 | | | $ | 1,661,705 | |
Net realized gain on investment and foreign currency transactions | | | 19,026,455 | | | | 529,841 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | (22,526,117 | ) | | | 17,582,786 | |
Contributions from Adviser (see Note B) | | | 5,816 | | | | –0 | – |
| | | | | | | | |
Net increase (decrease) in net assets from operations | | | (2,369,365 | ) | | | 19,774,332 | |
DIVIDENDS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | –0 | – | | | (969,189 | ) |
Class B | | | –0 | – | | | (406,590 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (67,932,548 | ) | | | (17,593,374 | ) |
| | | | | | | | |
Total increase (decrease) | | | (70,301,913 | ) | | | 805,179 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 157,110,188 | | | | 156,305,009 | |
| | | | | | | | |
End of period (including undistributed net investment income of $428,748 and $861,057, respectively) | | $ | 86,808,275 | | | $ | 157,110,188 | |
| | | | | | | | |
See notes to financial statements.
14
| | |
INTERNATIONAL GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein International Growth Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
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INTERNATIONAL GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stock: | | | | | | | | | | | | | | | | |
Financials | | $ | 3,129,319 | | | $ | 19,738,509 | | | $ | –0 | – | | $ | 22,867,828 | |
Consumer Discretionary | | | 3,096,575 | | | | 12,245,292 | | | | –0 | – | | | 15,341,867 | |
Consumer Staples | | | 628,336 | | | | 12,907,580 | | | | –0 | – | | | 13,535,916 | |
Health Care | | | 704,127 | | | | 10,260,904 | | | | –0 | – | | | 10,965,031 | |
Information Technology | | | 3,110,300 | | | | 6,206,112 | | | | –0 | – | | | 9,316,412 | |
Industrials | | | –0 | – | | | 7,311,233 | | | | –0 | – | | | 7,311,233 | |
Energy | | | 2,622,446 | | | | 1,645,572 | | | | –0 | – | | | 4,268,018 | |
Materials | | | –0 | – | | | 2,216,513 | | | | –0 | – | | | 2,216,513 | |
Short-Term Investments | | | –0 | – | | | 762,623 | | | | –0 | – | | | 762,623 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 2,295,104 | | | | –0 | – | | | –0 | – | | | 2,295,104 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 15,586,207 | | | | 73,294,338 | + | | | –0 | – | | | 88,880,545 | |
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Other Financial Instruments*: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | $ | –0 | – | | $ | 217,360 | | | $ | –0 | – | | $ | 217,360 | |
Liabilities: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | | –0 | – | | | (492,014 | ) | | | –0 | – | | | (492,014 | ) |
| | | | | | | | | | | | | | | | |
Total(a)(b) | | $ | 15,586,207 | | | $ | 73,019,684 | | | $ | –0 | – | | $ | 88,605,891 | |
| | | | | | | | | | | | | | | | |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
+ | | A significant portion of the Portfolio’s foreign equity investments are categorized as Level 2 investments since they are valued using fair value prices based on third party vendor modeling tools to the extent available, see Note A.1. |
(a) | | An amount of $4,915,880 was transferred from Level 1 to Level 2 due to the above mentioned foreign equity fair valuation using third party vendor modeling tools during the reporting period. |
(b) | | An amount of $2,167,844 was transferred from Level 2 to Level 1 as the above mentioned foreign equity fair valuation by the third party vendor was not applied during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
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NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, ..65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
During the year ended December 31, 2014, the Adviser reimbursed the Portfolio $5,816 for trading losses incurred due to a trade entry error.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,204.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $107,593, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits
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| | AllianceBernstein Variable Products Series Fund |
payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 29,176,945 | | | $ | 95,873,291 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 68,366,548 | |
| | | | |
Gross unrealized appreciation | | | 23,857,258 | |
Gross unrealized depreciation | | | (3,343,261 | ) |
| | | | |
Net unrealized appreciation | | $ | 20,513,997 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:
The Portfolio may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Portfolio bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Portfolio may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Portfolio enters into futures, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
During the year ended December 31, 2014, the Portfolio held futures for non-hedging purposes.
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INTERNATIONAL GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| • | | Forward Currency Exchange Contracts |
The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized appreciation and/or depreciation by the Portfolio. 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.
During the year ended December 31, 2014, the Portfolio held forward currency exchange contracts for hedging purposes.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolio and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
The Portfolio’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
At December 31, 2014, the Portfolio had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | $ | 217,360 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 492,014 | |
| | | | | | | | | | | | |
Total | | | | $ | 217,360 | | | | | $ | 492,014 | |
| | | | | | | | | | | | |
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| | AllianceBernstein Variable Products Series Fund |
The effect of derivative instruments on the statement of operations for the year ended December 31, 2014:
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Equity contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | $ | 649,603 | | | $ | –0 | – |
Foreign exchange contracts | | Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities | | | (1,195,018 | ) | | | 1,213,421 | |
| | | | | | | | | | |
Total | | | | $ | (545,415 | ) | | $ | 1,213,421 | |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2014:
| | | | |
Futures: | | | | |
Average original value of buy contracts | | $ | 42,419,972 | (a) |
| |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 31,020,806 | |
Average principal amount of sale contracts | | $ | 29,454,683 | |
(a) | | Positions were open for less than one month during the period, based on the daily average. |
For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Portfolio as of December 31, 2014:
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Received | | | Security Collateral Received | | | Net Amount of Derivatives Assets | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
BNP Paribas SA | | $ | 127,567 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 127,567 | |
HSBC Bank USA | | | 89,793 | | | | (89,793 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 217,360 | | | $ | (89,793 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 127,567 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Pledged | | | Security Collateral Pledged | | | Net Amount of Derivatives Liabilities | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Credit Suisse International | | $ | 48,669 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 48,669 | |
Goldman Sachs Bank USA | | | 198,393 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 198,393 | |
HSBC Bank USA | | | 121,413 | | | | (89,793 | ) | | | –0 | – | | | –0 | – | | | 31,620 | |
State Street Bank & Trust Co. | | | 77,405 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 77,405 | |
UBS AG | | | 46,134 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 46,134 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 492,014 | | | $ | (89,793 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 402,221 | ^ |
| | | | | | | | | | | | | | | | | | | | |
^ | | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
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INTERNATIONAL GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $2,181,730 and had received cash collateral which has been invested into AB Exchange Reserves of $2,295,104. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $53,423 and $1,742 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 177 | | | $ | 33,259 | | | $ | 31,141 | | | $ | 2,295 | |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 134,654 | | | | 168,679 | | | | | $ | 2,638,381 | | | $ | 3,058,525 | |
Shares issued in reinvestment of dividends | | | –0 | – | | | 53,487 | | | | | | –0 | – | | | 969,189 | |
Shares redeemed | | | (3,406,796 | ) | | | (604,017 | ) | | | | | (64,441,263 | ) | | | (10,946,120 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (3,272,142 | ) | | | (381,851 | ) | | | | $ | (61,802,882 | ) | | $ | (6,918,406 | ) |
| | | | | | | | | | | | | | | | | | |
22
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 315,056 | | | | 323,357 | | | | | $ | 6,091,692 | | | $ | 5,795,702 | |
Shares issued in reinvestment of dividends | | | –0 | – | | | 22,639 | | | | | | –0 | – | | | 406,590 | |
Shares redeemed | | | (632,180 | ) | | | (943,420 | ) | | | | | (12,221,358 | ) | | | (16,877,260 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (317,124 | ) | | | (597,424 | ) | | | | $ | (6,129,666 | ) | | $ | (10,674,968 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Emerging Market Risk—Investments in emerging market countries may have more risk because the markets are less developed and less liquid, and because these investments may be subject to increased economic, political, regulatory and other uncertainties.
Capitalization Risk—Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | –0 | – | | $ | 1,375,779 | |
| | | | | | | | |
Total taxable distributions paid | | $ | –0 | – | | $ | 1,375,779 | |
| | | | | | | | |
23
| | |
INTERNATIONAL GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 152,287 | |
Accumulated capital and other losses | | | (36,825,896 | )(a) |
Unrealized appreciation/(depreciation) | | | 20,461,200 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | (16,212,409 | ) |
| | | | |
(a) | | As of December 31, 2014, the Portfolio had a net capital loss carryforward of $36,822,293. During the fiscal year, the Portfolio utilized $20,539,739 of capital loss carryforwards to offset current year net realized gains. At December 31, 2014, the Portfolio had a post-October short-term capital loss deferral of $3,603 which is deemed to arise on January 1, 2015. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales and the realization for tax purposes of gain/losses on certain derivative instruments. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation. As of December 31, 2014, the Portfolio had a net short-term capital loss carryforward of $36,822,293 which will expire in 2017.
During the current fiscal year, permanent differences primarily due to reclassifications of foreign currency and foreign capital gains tax resulted in a net decrease in undistributed net investment income and a net decrease in accumulated net realized loss on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
24
| | |
|
INTERNATIONAL GROWTH PORTFOLIO |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $19.27 | | | | $17.13 | | | | $15.08 | | | | $18.42 | | | | $16.66 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .24 | | | | .21 | | | | .21 | | | | .26 | | | | .18 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (.47 | ) | | | 2.11 | | | | 2.12 | | | | (3.08 | ) | | | 1.92 | |
Contributions from Adviser | | | .00 | (b) | | | –0 | – | | | –0 | – | | | .00 | (b) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | (.23 | ) | | | 2.32 | | | | 2.33 | | | | (2.82 | ) | | | 2.10 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.18 | ) | | | (.28 | ) | | | (.52 | ) | | | (.34 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $19.04 | | | | $19.27 | | | | $17.13 | | | | $15.08 | | | | $18.42 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c) | | | (1.19 | )% | | | 13.60 | % | | | 15.54 | % | | | (15.85 | )% | | | 12.89 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $38,924 | | | | $102,467 | | | | $97,611 | | | | $90,912 | | | | $126,339 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.07 | % | | | .94 | % | | | .97 | % | | | .94 | % | | | .93 | %+ |
Net investment income | | | 1.20 | % | | | 1.15 | % | | | 1.33 | % | | | 1.53 | % | | | 1.08 | %+ |
Portfolio turnover rate | | | 29 | % | | | 31 | % | | | 52 | % | | | 66 | % | | | 104 | % |
See footnote summary on page 26.
25
| | |
INTERNATIONAL GROWTH PORTFOLIO |
FINANCIAL HIGHLIGHTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $19.08 | | | | $16.96 | | | | $14.93 | | | | $18.24 | | | | $16.51 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .20 | | | | .16 | | | | .18 | | | | .22 | | | | .14 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (.47 | ) | | | 2.09 | | | | 2.08 | | | | (3.06 | ) | | | 1.89 | |
Contributions from Adviser | | | .00 | (b) | | | –0 | – | | | –0 | – | | | .00 | (b) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | (.27 | ) | | | 2.25 | | | | 2.26 | | | | (2.84 | ) | | | 2.03 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.13 | ) | | | (.23 | ) | | | (.47 | ) | | | (.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $18.81 | | | | $19.08 | | | | $16.96 | | | | $14.93 | | | | $18.24 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c) | | | (1.41 | )% | | | 13.32 | % | | | 15.23 | % | | | (16.04 | )% | | | 12.61 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $47,884 | | | | $54,643 | | | | $58,694 | | | | $58,322 | | | | $74,879 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.36 | % | | | 1.19 | % | | | 1.22 | % | | | 1.19 | % | | | 1.18 | %+ |
Net investment income | | | 1.02 | % | | | .92 | % | | | 1.11 | % | | | 1.27 | % | | | .83 | %+ |
Portfolio turnover rate. | | | 29 | % | | | 31 | % | | | 52 | % | | | 66 | % | | | 104 | % |
(a) | | Based on average shares outstanding. |
(b) | | Amount is less than $.005. |
(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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
26
| | |
| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein International Growth Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein International Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein International Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
27
| | |
| | |
| | |
2014 TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the earnings of the Portfolio for the taxable year ended December 31, 2014.
The Portfolio intends to make an election to pass through foreign taxes to its shareholders. For the taxable year ended December 31, 2014, $124,616 of foreign taxes may be passed through and the associated foreign source income for information reporting purposes is $2,188,549.
28
| | |
| | |
INTERNATIONAL GROWTH | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Daniel C. Roarty(2), Vice President Tassos M. Stassopoulos(2), Vice President Emilie D. Wrapp, Secretary | | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
| | |
CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Global Growth and Thematic Investment Team. Messrs. Daniel C. Roarty and Tassos M. Stassopoulos are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
29
| | |
|
INTERNATIONAL GROWTH PORTFOLIO |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2006, and interim CEO 1999-2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001-2008. | | | 116 | | | None |
| | | | | | | | |
30
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
31
| | |
INTERNATIONAL GROWTH PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for the Portfolio’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the “1940 Act”, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
32
| | |
| | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith
54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Daniel C. Roarty 43 | | Vice President | | Senior Vice President of the Adviser** and Technology Sector Head, with which he has been associated since May 2011. Prior thereto, he was in research and portfolio management at Nuveen Investments since prior to 2010. |
| | | | |
Tassos M. Stassopoulos 46 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABIS and ABI are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
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| | |
INTERNATIONAL GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein International Growth Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In Jones, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($MIL) | |
International Growth Portfolio | | International | | 0.75% on 1st $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | $ | 95.6 | |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $54,097 (0.035% of the Portfolio’s average daily net assets) for such services.
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
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| | AllianceBernstein Variable Products Series Fund |
Set forth below are the Portfolio’s total expense ratios for the most recently completed fiscal year:
| | | | |
Portfolio | | Total Expense Ratio | | Fiscal Year |
International Growth Portfolio | | Class A 0.94% | | December 31 |
| Class B 1.19% | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($ MIL) | | AllianceBernstein Institutional
Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
International Growth Portfolio | | $95.6 | | International Research Growth AC Schedule 0.85% on first $25m 0.65% on next $25m 0.55% on next $50m 0.45% on the balance Minimum account size $25m | | | 0.655 | % | | | 0.750 | % |
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
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INTERNATIONAL GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser also manages AllianceBernstein International Growth Fund, Inc. (“International Growth Fund, Inc.”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of International Growth Fund, Inc. and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
International Growth Portfolio | | International Growth Fund, Inc. | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750% | | | | 0.750% | |
The Adviser manages Sanford C. Bernstein Fund, Inc. (“SCB Fund”), an open-end management investment company. The International Portfolio of SCB Fund (“SCB International Portfolio”) has a somewhat similar investment style as the Portfolio. Set forth below are the fee schedule of SCB International Portfolio and what would have been the effective advisory fee of the Portfolio had the fee schedule of SCB International Portfolio been applicable to the Portfolio based on March 31, 2014 net assets:
| | | | | | | | | | | | |
Portfolio | | SCB Fund Portfolio | | Fee Schedule | | SCB Fund Effective Fee | | | Portfolio Advisory Fee | |
International Growth Portfolio7 | | International Portfolio | | 0.925% on 1st $1 billion 0.850% on next $3 billion 0.800% on next $2 billion 0.750% on next $2 billion 0.650% thereafter The Adviser is waving 5 basis points in advisory fees effective through October 31, 2014. | | | 0.875% | | | | 0.750% | |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Portfolio.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.8 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.9,10
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The investment guidelines of the Portfolio are more restrictive than the SCB Fund portfolio. The Portfolio invests primarily in either growth or value equity securities, in contrast to the SCB Fund portfolio, which invests in both growth and value equity securities. |
8 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
9 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
10 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
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| | AllianceBernstein Variable Products Series Fund |
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)11 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
International Growth Portfolio | | | 0.750 | | | | 0.800 | | | | 4/13 | |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.12
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)13 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
International Growth Portfolio | | | 0.936 | | | | 0.936 | | | | 7/13 | | | | 0.990 | | | | 15/42 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than they do on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $141,206 in Rule 12b-1 fees.
11 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
12 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
13 | | Most recently completed fiscal year end Class A total expense ratio. |
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INTERNATIONAL GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $326,524 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.14
The Portfolio did not effect brokerage transactions and pay commissions to the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) nor its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted in the future with the Portfolio would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.15,16 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.17 The independent consultant then
14 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
15 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
16 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
17 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
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| | AllianceBernstein Variable Products Series Fund |
discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio18 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)19 for the periods ended February 28, 2014.20
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
International Growth Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 11.36 | | | | 16.54 | | | | 17.40 | | | | 10/13 | | | | 46/54 | |
3 year | | | 3.50 | | | | 6.56 | | | | 7.51 | | | | 13/13 | | | | 46/50 | |
5 year | | | 16.27 | | | | 17.47 | | | | 18.36 | | | | 11/12 | | | | 36/45 | |
10 year | | | 6.79 | | | | 7.34 | | | | 7.33 | | | | 7/11 | | | | 20/33 | |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)21 versus its benchmarks.22 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.23
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
International Growth Portfolio | | | 11.36 | | | | 3.50 | | | | 16.27 | | | | 6.79 | | | | 8.15 | | | | 20.51 | | | | 0.35 | | | | 10 | |
MSCI World ex US Index (Net) | | | 17.91 | | | | 5.72 | | | | 17.47 | | | | 6.81 | | | | N/A | | | | 18.18 | | | | 0.36 | | | | 10 | |
MSCI AC World ex US Index (Net)24 | | | 12.25 | | | | 3.98 | | | | 17.25 | | | | 7.16 | | | | N/A | | | | N/A | | | | N/A | | | | N/A | |
Inception Date: September 23, 1994 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
18 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
19 | | The Portfolio’s PG is identical to the Portfolio’s respective EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
20 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
21 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
22 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
23 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
24 | | Benchmark since inception date is the nearest month end after the Portfolio’s inception date. |
39
VPS-IG-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | INTERNATIONAL VALUE PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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INTERNATIONAL VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—International Value Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio will invest primarily in a diversified portfolio of equity securities of established companies selected from more than 40 industries and more than 40 developed and emerging-market countries. These countries currently include the developed nations in Europe and the Far East, Canada, Australia and emerging market countries worldwide. Under normal market conditions, the Portfolio invests significantly (at least 40%—unless market conditions are not deemed favorable by AllianceBernstein L.P. (the “Adviser”) in securities of non-U.S. companies. In addition, the Portfolio invests, under normal circumstances, in the equity securities of companies located in at least three countries.
The Portfolio invests in companies that are determined by the Adviser to be undervalued, using a fundamental value approach. In selecting securities for the Portfolio, the Adviser uses its fundamental and quantitative research to identify companies whose stocks are priced low in relation to their perceived long-term earnings power.
Currencies can have a dramatic impact on equity returns, significantly adding to returns in some years and greatly diminishing them in others. The Adviser evaluates currency and equity positions separately and may seek to hedge the currency exposure resulting from securities positions when it finds the currency exposure unattractive. To hedge a portion of its currency risk, the Portfolio may from time to time invest in currency-related derivatives, including forward currency exchange contracts, futures, options on futures, swaps and options. The Adviser may also seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives.
The Portfolio may enter into other derivatives transactions, such as options, futures, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds, or ETFs. The Portfolio may, at times, invest in shares of ETFs in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments. The Portfolio may invest in depositary receipts, instruments of supranational entities denominated in the currency of any country, securities of multinational companies and “semi-governmental securities”, and enter into forward commitments.
INVESTMENT RESULTS
The table on page 4 shows the Portfolio’s performance compared to its benchmark, the Morgan Stanley Capital International Europe, Australasia and Far East (“MSCI EAFE”) Index (net), for the one-, five- and 10- year periods ended December 31, 2014.
All share classes of the Portfolio underperformed the benchmark for the annual period. Security selection was the main source of underperformance, particularly in the capital equipment, finance and construction & housing sectors. Sector selection was positive, owing to overweights in the technology, telecommunications and transportation sectors, which helped to offset some of the underperformance.
Country exposure was positive overall, owing to an underweight in Australia and overweight in Taiwan. Overweights in France and Korea negatively impacted returns. At the end of the reporting period, the Portfolio did not have any allocations to Russian stocks, as the International Value Investment Team (the “Team”) progressively sold companies which were exposed to the Ukraine/Russia situation, or investment themes had played out. In the Team’s view, the increased political risks, coupled with the potential fallout on Russia’s economy and markets, created uncertainties that could not be appropriately incorporated into earnings forecasts, and outweighed the fundamental strengths of the Portfolio’s holdings in the region. For other holdings that have exposure to Russia’s economy, the Team continues to monitor the situation closely.
Derivatives utilized during the annual period included futures for investment purposes, which added to performance; and currencies for hedging and investment purposes, which detracted from performance.
MARKET REVIEW AND INVESTMENT STRATEGY
International equity markets declined for the annual period ended December 31, 2014. The eurozone economy stalled as macroeconomic data in the region remained weak. In addition, political turmoil in Greece and worries about the implications for inflation and global growth from tumbling oil prices also impacted investor sentiment. In Japan, gross domestic product has risen by only 0.3% over the six
1
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| | AllianceBernstein Variable Products Series Fund |
quarters since the Bank of Japan’s aggressive stimulus program began in April 2013, raising concerns that Prime Minister Shinzo Abe’s plan is not working. In emerging markets, cheaper oil has put more disinflationary pressure on China’s economy, which is already coping with a structural slowdown. Russia was hit by a perfect storm of sanctions and lower oil prices, prompting a sharp depreciation in the ruble. In contrast, U.S. stocks were pushed higher by signs that the U.S. economy was continuing to improve. These included an upward revision of the third-quarter U.S. gross domestic product, which benefited from an increase in spending. Manufacturing indicators rose, and unemployment fell from 6.6% at the beginning of the year to 5.8% in November, bolstering consumer confidence and increasing the chances of a rate hike from the U.S. Federal Reserve in 2015.
The Portfolio is focused on attractively valued opportunities, which currently are widespread across many industry sectors and regions. The Team prefers companies with robust cash flow generation and strong balance sheets, whose stocks are trading at deep valuation discounts.
2
| | |
| | |
INTERNATIONAL VALUE PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged MSCI EAFE Index (net) does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI EAFE Index (net; free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets, excluding the U.S. and Canada. Net returns reflect the reinvestment of dividends after the deduction of non-U.S. withholding tax. MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices, any securities or financial products. This report is not approved, reviewed or produced by MSCI. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as value, may underperform the market generally.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Emerging Market Risk: Investments in emerging market countries may have more risk because the markets are less developed and less liquid as well as being subject to increased economic, political, regulatory or other uncertainties.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Leverage Risk: When the Portfolio borrows money or otherwise leverages its portfolio, it may be more volatile because leverage tends to exaggerate the effect of any increase or decrease in the value of the Portfolio’s investments. The Portfolio may create leverage through the use of reverse repurchase agreements, forward commitments, or by borrowing money.
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
3
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| | |
INTERNATIONAL VALUE PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | NAV Returns | |
| 1 Year | | | 5 Years* | | | 10 Years* | |
International Value Portfolio Class A | | | -6.21% | | | | 2.22% | | | | 1.66% | |
International Value Portfolio Class B | | | -6.46% | | | | 1.95% | | | | 1.40% | |
MSCI EAFE Index (net) | | | -4.90% | | | | 5.33% | | | | 4.43% | |
* Average annual returns. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 0.82% and 1.07% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
INTERNATIONAL VALUE PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in the International Value Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the MSCI EAFE Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 3.
4
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| | |
INTERNATIONAL VALUE PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 900.60 | | | $ | 4.02 | | | | 0.84 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.97 | | | $ | 4.28 | | | | 0.84 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 899.10 | | | $ | 5.22 | | | | 1.09 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.71 | | | $ | 5.55 | | | | 1.09 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
5
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INTERNATIONAL VALUE PORTFOLIO | | |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $VALUE | | | PERCENT OF NET ASSETS | |
Roche Holding AG | | $ | 18,413,231 | | | | 2.8 | % |
GlaxoSmithKline PLC | | | 17,856,259 | | | | 2.7 | |
Airbus Group NV | | | 14,949,063 | | | | 2.2 | |
Muenchener Rueckversicherungs-Gesellschaft AG | | | 14,345,857 | | | | 2.1 | |
HSBC Holdings PLC | | | 14,303,441 | | | | 2.1 | |
Actelion Ltd. (REG) | | | 13,690,196 | | | | 2.1 | |
Liberty Global PLC—Series C | | | 13,072,541 | | | | 2.0 | |
Vodafone Group PLC | | | 12,088,115 | | | | 1.8 | |
Total SA | | | 11,952,425 | | | | 1.8 | |
Honda Motor Co., Ltd. | | | 11,905,472 | | | | 1.8 | |
| | | | | | | | |
| | $ | 142,576,600 | | | | 21.4 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 160,824,536 | | | | 24.3 | % |
Consumer Discretionary | | | 107,371,661 | | | | 16.2 | |
Industrials | | | 85,854,702 | | | | 13.0 | |
Health Care | | | 63,719,200 | | | | 9.6 | |
Telecommunication Services | | | 53,776,227 | | | | 8.1 | |
Information Technology | | | 51,796,737 | | | | 7.8 | |
Materials | | | 47,896,725 | | | | 7.2 | |
Energy | | | 45,771,263 | | | | 6.9 | |
Consumer Staples | | | 26,105,588 | | | | 3.9 | |
Utilities | | | 13,349,836 | | | | 2.0 | |
Short-Term Investments | | | 6,306,044 | | | | 1.0 | |
| | | | | | | | |
Total Investments | | $ | 662,772,519 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. The Portfolio also enters into derivatives transactions, which may be used for hedging or investment purpose (see “Portfolio of Investments” section of the report for additional details). |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
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INTERNATIONAL VALUE PORTFOLIO | | |
COUNTRY BREAKDOWN* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COUNTRY | | U.S.$ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Japan | | $ | 159,619,632 | | | | 24.1 | % |
United Kingdom | | | 117,300,887 | | | | 17.7 | |
France | | | 99,242,797 | | | | 15.0 | |
Netherlands | | | 37,510,834 | | | | 5.7 | |
Germany | | | 32,377,999 | | | | 4.9 | |
Switzerland | | | 32,103,427 | | | | 4.8 | |
Italy | | | 28,202,514 | | | | 4.2 | |
Australia | | | 25,756,749 | | | | 3.9 | |
Taiwan | | | 21,294,084 | | | | 3.2 | |
China | | | 16,741,991 | | | | 2.5 | |
Hong Kong | | | 12,887,325 | | | | 1.9 | |
India | | | 12,778,639 | | | | 1.9 | |
Denmark | | | 12,539,237 | | | | 1.9 | |
Other | | | 48,110,360 | | | | 7.3 | |
Short-Term Investments | | | 6,306,044 | | | | 1.0 | |
| | | | | | | | |
Total Investments | | $ | 662,772,519 | | | | 100.0 | % |
* | | All data are as of December 31, 2014. The Portfolio’s country breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. “Other” country weightings represent 1.7% or less in the following countries: Brazil, Israel, Norway, Portugal, South Africa, South Korea and Turkey. |
7
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INTERNATIONAL VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.5% | | | | | | | | |
| | | | | | | | |
FINANCIALS–24.1% | | | | | | | | |
BANKS–14.7% | | | | | | | | |
Bank Hapoalim BM | | | 698,875 | | | $ | 3,286,198 | |
Bank of Baroda | | | 154,180 | | | | 2,635,651 | |
Bank of China Ltd.–Class H | | | 7,561,000 | | | | 4,243,755 | |
Bank of Queensland Ltd. | | | 479,700 | | | | 4,725,966 | |
Commerzbank AG(a) | | | 350,320 | | | | 4,595,004 | |
Danske Bank A/S | | | 349,330 | | | | 9,444,431 | |
HSBC Holdings PLC | | | 1,513,630 | | | | 14,303,441 | |
ICICI Bank Ltd. | | | 531,850 | | | | 2,952,590 | |
ING Groep NV(a) | | | 578,830 | | | | 7,478,286 | |
Intesa Sanpaolo SpA | | | 1,815,080 | | | | 5,265,367 | |
Itausa–Investimentos Itau SA (Preference Shares) | | | 608,300 | | | | 2,148,799 | |
Mitsubishi UFJ Financial Group, Inc. | | | 1,467,000 | | | | 8,060,027 | |
Shinhan Financial Group Co., Ltd.(a) | | | 49,440 | | | | 1,987,246 | |
Societe Generale SA | | | 222,092 | | | | 9,294,587 | |
Sumitomo Mitsui Financial Group, Inc. | | | 153,800 | | | | 5,560,286 | |
UniCredit SpA | | | 1,839,450 | | | | 11,782,804 | |
| | | | | | | | |
| | | | | | | 97,764,438 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–3.0% | | | | | | | | |
Challenger Ltd./Australia | | | 750,652 | | | | 3,965,345 | |
Friends Life Group Ltd. | | | 813,170 | | | | 4,618,179 | |
ORIX Corp. | | | 942,300 | | | | 11,856,763 | |
| | | | | | | | |
| | | | | | | 20,440,287 | |
| | | | | | | | |
INSURANCE–4.0% | | | | | | | | |
AIA Group Ltd. | | | 1,074,400 | | | | 5,905,215 | |
Direct Line Insurance Group PLC | | | 740,280 | | | | 3,348,725 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen | | | 72,040 | | | | 14,345,857 | |
Suncorp Group Ltd. | | | 264,230 | | | | 3,018,506 | |
| | | | | | | | |
| | | | | | | 26,618,303 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–2.0% | | | | | | | | |
Aeon Mall Co., Ltd.(b) | | | 203,100 | | | | 3,599,129 | |
China Overseas Land & Investment Ltd. | | | 948,000 | | | | 2,810,484 | |
Lend Lease Group | | | 355,270 | | | | 4,731,794 | |
Wharf Holdings Ltd. (The) | | | 311,000 | | | | 2,232,697 | |
| | | | | | | | |
| | | | | | | 13,374,104 | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–0.4% | | | | | | | | |
LIC Housing Finance Ltd. | | | 382,250 | | | | 2,627,404 | |
| | | | | | | | |
| | | | | | | 160,824,536 | |
| | | | | | | | |
| | | | | | | | |
CONSUMER DISCRETIONARY–16.1% | | | | | | | | |
AUTO COMPONENTS–7.0% | | | | | | | | |
Aisin Seiki Co., Ltd. | | | 200,300 | | | $ | 7,196,463 | |
Bridgestone Corp. | | | 143,000 | | | | 4,959,515 | |
Cie Generale des Etablissements Michelin–Class B | | | 95,132 | | | | 8,587,249 | |
GKN PLC | | | 814,740 | | | | 4,336,646 | |
Plastic Omnium SA | | | 132,470 | | | | 3,594,951 | |
Sumitomo Electric Industries Ltd. | | | 608,600 | | | | 7,600,972 | |
Valeo SA | | | 83,730 | | | | 10,418,536 | |
| | | | | | | | |
| | | | | | | 46,694,332 | |
| | | | | | | | |
AUTOMOBILES–4.7% | | | | | | | | |
Bayerische Motoren Werke AG | | | 42,820 | | | | 4,621,056 | |
Great Wall Motor Co., Ltd.–Class H | | | 892,000 | | | | 5,062,732 | |
Honda Motor Co., Ltd.(b) | | | 405,800 | | | | 11,905,472 | |
Renault SA | | | 44,920 | | | | 3,271,806 | |
Tata Motors Ltd. | | | 342,320 | | | | 2,676,462 | |
Volkswagen AG (Preference Shares) | | | 17,850 | | | | 3,967,258 | |
| | | | | | | | |
| | | | | | | 31,504,786 | |
| | | | | | | | |
MEDIA–2.3% | | | | | | | | |
Liberty Global PLC–Series C(a) | | | 270,597 | | | | 13,072,541 | |
Smiles SA | | | 110,700 | | | | 1,917,740 | |
| | | | | | | | |
| | | | | | | 14,990,281 | |
| | | | | | | | |
SPECIALTY RETAIL–1.7% | | | | | | | | |
Kingfisher PLC | | | 644,960 | | | | 3,409,347 | |
Shimamura Co., Ltd.(b) | | | 38,300 | | | | 3,305,172 | |
Yamada Denki Co., Ltd.(b) | | | 1,423,900 | | | | 4,777,355 | |
| | | | | | | | |
| | | | | | | 11,491,874 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–0.4% | | | | | | | | |
Kering | | | 14,000 | | | | 2,690,388 | |
| | | | | | | | |
| | | | | | | 107,371,661 | |
| | | | | | | | |
INDUSTRIALS–12.9% | | | | | | | | |
AEROSPACE & DEFENSE–3.2% | | | | | | | | |
Airbus Group NV | | | 302,380 | | | | 14,949,063 | |
Safran SA | | | 98,190 | | | | 6,057,827 | |
| | | | | | | | |
| | | | | | | 21,006,890 | |
| | | | | | | | |
AIR FREIGHT & LOGISTICS–0.6% | | | | | | | | |
Royal Mail PLC | | | 574,550 | | | | 3,828,772 | |
| | | | | | | | |
AIRLINES–2.8% | | | | | | | | |
International Consolidated Airlines Group SA(a) | | | 1,322,700 | | | | 9,957,373 | |
Japan Airlines Co., Ltd. | | | 78,400 | | | | 2,324,486 | |
Qantas Airways Ltd.(a) | | | 3,169,033 | | | | 6,155,255 | |
| | | | | | | | |
| | | | | | | 18,437,114 | |
| | | | | | | | |
8
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–2.2% | | | | | | | | |
Bidvest Group Ltd. (The) | | | 110,440 | | | $ | 2,887,328 | |
Hutchison Whampoa Ltd. | | | 415,000 | | | | 4,749,413 | |
Toshiba Corp.(b) | | | 1,731,000 | | | | 7,300,143 | |
| | | | | | | | |
| | | | | | | 14,936,884 | |
| | | | | | | | |
MACHINERY–1.1% | | | | | | | | |
JTEKT Corp. | | | 453,100 | | | | 7,625,575 | |
| | | | | | | | |
MARINE–1.4% | | | | | | | | |
AP Moeller–Maersk A/S–Class B | | | 1,556 | | | | 3,094,806 | |
Nippon Yusen KK | | | 2,159,000 | | | | 6,098,110 | |
| | | | | | | | |
| | | | | | | 9,192,916 | |
| | | | | | | | |
ROAD & RAIL–1.1% | | | | | | | | |
Central Japan Railway Co. | | | 49,100 | | | | 7,358,924 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–0.5% | | | | | | | | |
Rexel SA | | | 193,548 | | | | 3,467,627 | |
| | | | | | | | |
| | | | | | | 85,854,702 | |
| | | | | | | | |
HEALTH CARE–9.5% | | | | | | | | |
BIOTECHNOLOGY–2.0% | | | | | | | | |
Actelion Ltd. (REG)(a) | | | 118,920 | | | | 13,690,196 | |
| | | | | | | | |
PHARMACEUTICALS–7.5% | | | | | | | | |
Astellas Pharma, Inc. | | | 566,100 | | | | 7,881,301 | |
GlaxoSmithKline PLC | | | 832,320 | | | | 17,856,259 | |
Indivior PLC(a) | | | 62,830 | | | | 146,303 | |
Roche Holding AG | | | 67,960 | | | | 18,413,231 | |
Teva Pharmaceutical Industries Ltd. | | | 99,990 | | | | 5,731,910 | |
| | | | | | | | |
| | | | | | | 50,029,004 | |
| | | | | | | | |
| | | | | | | 63,719,200 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–8.1% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–5.2% | | | | | | | | |
Bezeq The Israeli Telecommunication Corp., Ltd. | | | 1,378,693 | | | | 2,445,547 | |
Nippon Telegraph & Telephone Corp. | | | 231,600 | | | | 11,830,729 | |
Telecom Italia SpA (savings shares) | | | 8,264,350 | | | | 6,909,362 | |
Telenor ASA | | | 168,030 | | | | 3,399,014 | |
Vivendi SA(a) | | | 395,396 | | | | 9,841,616 | |
| | | | | | | | |
| | | | | | | 34,426,268 | |
| | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–2.9% | | | | | | | | |
China Mobile Ltd. | | | 394,000 | | | | 4,625,020 | |
Turkcell Iletisim Hizmetleri AS(a) | | | 432,090 | | | | 2,636,824 | |
Vodafone Group PLC | | | 3,525,644 | | | | 12,088,115 | |
| | | | | | | | |
| | | | | | | 19,349,959 | |
| | | | | | | | |
| | | | | | | 53,776,227 | |
| | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–7.8% | | | | | | | | |
IT SERVICES–0.6% | | | | | | | | |
Cap Gemini SA | | | 53,510 | | | $ | 3,826,881 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–3.8% | | | | | | | | |
Advanced Semiconductor Engineering, Inc. | | | 2,956,000 | | | | 3,510,626 | |
ASM International NV | | | 94,630 | | | | 4,007,449 | |
Infineon Technologies AG | | | 278,598 | | | | 2,948,083 | |
Novatek Microelectronics Corp. | | | 706,000 | | | | 3,945,197 | |
Sumco Corp.(b) | | | 448,700 | | | | 6,423,634 | |
Tokyo Electron Ltd. | | | 58,500 | | | | 4,436,068 | |
| | | | | | | | |
| | | | | | | 25,271,057 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–3.4% | | | | | | | | |
Asustek Computer, Inc. | | | 394,000 | | | | 4,298,934 | |
Casetek Holdings Ltd. | | | 671,000 | | | | 3,778,391 | |
Catcher Technology Co., Ltd. | | | 746,000 | | | | 5,760,936 | |
Samsung Electronics Co., Ltd. | | | 7,370 | | | | 8,860,538 | |
| | | | | | | | |
| | | | | | | 22,698,799 | |
| | | | | | | | |
| | | | | | | 51,796,737 | |
| | | | | | | | |
MATERIALS–7.2% | | | | | | | | |
CHEMICALS–4.9% | | | | | | | | |
Arkema SA(b) | | | 82,521 | | | | 5,457,676 | |
BASF SE | | | 22,660 | | | | 1,900,741 | |
Denki Kagaku Kogyo KK | | | 970,000 | | | | 3,552,697 | |
Incitec Pivot Ltd. | | | 1,221,580 | | | | 3,159,883 | |
JSR Corp.(b) | | | 480,100 | | | | 8,240,571 | |
Koninklijke DSM NV | | | 118,995 | | | | 7,257,860 | |
Mitsubishi Gas Chemical Co., Inc.(b) | | | 607,000 | | | | 3,046,469 | |
| | | | | | | | |
| | | | | | | 32,615,897 | |
| | | | | | | | |
METALS & MINING–1.6% | | | | | | | | |
Dowa Holdings Co., Ltd. | | | 289,000 | | | | 2,296,110 | |
Rio Tinto PLC | | | 135,440 | | | | 6,243,386 | |
Tata Steel Ltd. | | | 299,700 | | | | 1,886,532 | |
| | | | | | | | |
| | | | | | | 10,426,028 | |
| | | | | | | | |
PAPER & FOREST PRODUCTS–0.7% | | | | | | | | |
Mondi PLC | | | 298,840 | | | | 4,854,800 | |
| | | | | | | | |
| | | | | | | 47,896,725 | |
| | | | | | | | |
ENERGY–6.9% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.4% | | | | | | | | |
Aker Solutions ASA(a)(c) | | | 418,792 | | | | 2,329,425 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–6.5% | | | | | | | | |
BG Group PLC | | | 839,106 | | | | 11,228,666 | |
JX Holdings, Inc.(b) | | | 2,446,000 | | | | 9,518,867 | |
9
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Petroleo Brasileiro SA (Sponsored ADR) | | | 310,330 | | | $ | 2,352,301 | |
Royal Dutch Shell PLC (Euronext Amsterdam)–Class A | | | 251,719 | | | | 8,389,579 | |
Total SA | | | 233,300 | | | | 11,952,425 | |
| | | | | | | | |
| | | | | | | 43,441,838 | |
| | | | | | | | |
| | | | | | | 45,771,263 | |
| | | | | | | | |
CONSUMER STAPLES–3.9% | | | | | | | | |
BEVERAGES–0.4% | | | | | | | | |
Asahi Group Holdings Ltd. | | | 92,600 | | | | 2,864,794 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–1.5% | | | | | | | | |
Koninklijke Ahold NV | | | 583,905 | | | | 10,377,660 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–0.8% | | | | | | | | |
Reckitt Benckiser Group PLC | | | 62,830 | | | | 5,088,849 | |
| | | | | | | | |
TOBACCO–1.2% | | | | | | | | |
Imperial Tobacco Group PLC | | | 176,610 | | | | 7,774,285 | |
| | | | | | | | |
| | | | | | | 26,105,588 | |
| | | | | | | | |
UTILITIES–2.0% | | | | | | | | |
ELECTRIC UTILITIES–2.0% | | | | | | | | |
EDP–Energias de Portugal SA | | | 843,990 | | | | 3,272,690 | |
Electricite de France SA | | | 211,860 | | | | 5,832,165 | |
Enel SpA | | | 952,320 | | | | 4,244,981 | |
| | | | | | | | |
| | | | | | | 13,349,836 | |
| | | | | | | | |
Total Common Stocks (cost $636,050,139) | | | | | | | 656,466,475 | |
| | | | | | | | |
Company | | Principal Amount (000) | | | U.S. $ Value | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–1.0% | | | | | | | | |
TIME DEPOSIT–1.0% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $6,306,044) | | $ | 6,306 | | | $ | 6,306,044 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–99.5% (cost $642,356,183) | | | | | | | 662,772,519 | |
| | | | | | | | |
| | Shares | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.6% | | | | | | | | |
INVESTMENT COMPANIES–1.6% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(d)(e) (cost $10,876,567) | | | 10,876,567 | | | | 10,876,567 | |
| | | | | | | | |
TOTAL INVESTMENTS–101.1% (cost $653,232,750) | | | | | | | 673,649,086 | |
Other assets less liabilities–(1.1)% | | | | | | | (7,462,694 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 666,186,392 | |
| | | | | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | | | |
Type | | Number of Contracts | | | Expiration Month | | Original Value | | | Value at December 31, 2014 | | | Unrealized Appreciation/ (Depreciation) | |
Purchased Contracts | | | | | | | | | | | | | | | | | | |
Euro STOXX 50 Index Futures | | | 63 | | | March 2015 | | $ | 2,283,664 | | | $ | 2,388,385 | | | $ | 104,721 | |
FORWARD CURRENCY EXCHANGE CONTRACTS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
Bank of America, NA | | | USD | | | | 5,134 | | | | EUR | | | | 4,039 | | | | 1/15/15 | | | $ | (245,974 | ) |
Bank of America, NA | | | USD | | | | 13,922 | | | | SEK | | | | 100,505 | | | | 1/15/15 | | | | (1,028,955 | ) |
Barclays Bank PLC | | | HKD | | | | 105,613 | | | | USD | | | | 13,615 | | | | 1/15/15 | | | | (3,721 | ) |
Barclays Bank PLC | | | NOK | | | | 40,947 | | | | USD | | | | 5,955 | | | | 1/15/15 | | | | 462,134 | |
Barclays Bank PLC | | | USD | | | | 6,935 | | | | SEK | | | | 51,296 | | | | 1/15/15 | | | | (354,778 | ) |
BNP Paribas SA | | | EUR | | | | 8,740 | | | | USD | | | | 11,080 | | | | 1/15/15 | | | | 502,583 | |
BNP Paribas SA | | | GBP | | | | 17,855 | | | | USD | | | | 28,761 | | | | 1/15/15 | | | | 933,928 | |
10
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
Counterparty | | Contracts to Deliver (000) | | | In Exchange For (000) | | | Settlement Date | | | Unrealized Appreciation/ (Depreciation) | |
BNP Paribas SA | | | USD | | | | 17,659 | | | | AUD | | | | 20,453 | | | | 1/15/15 | | | $ | (973,081 | ) |
BNP Paribas SA | | | USD | | | | 2,299 | | | | JPY | | | | 247,466 | | | | 1/15/15 | | | | (232,412 | ) |
BNP Paribas SA | | | USD | | | | 1,790 | | | | RUB | | | | 79,782 | | | | 1/15/15 | | | | (474,985 | ) |
Citibank | | | CHF | | | | 3,845 | | | | USD | | | | 4,056 | | | | 1/15/15 | | | | 188,008 | |
Citibank | | | GBP | | | | 7,511 | | | | USD | | | | 11,858 | | | | 1/15/15 | | | | 151,795 | |
Citibank | | | NOK | | | | 28,019 | | | | USD | | | | 4,225 | | | | 1/15/15 | | | | 466,491 | |
Credit Suisse International | | | RUB | | | | 79,782 | | | | USD | | | | 1,946 | | | | 1/15/15 | | | | 630,448 | |
Credit Suisse International | | | USD | | | | 25,525 | | | | GBP | | | | 15,743 | | | | 1/15/15 | | | | (990,164 | ) |
Deutsche Bank AG | | | GBP | | | | 1,721 | | | | USD | | | | 2,776 | | | | 1/15/15 | | | | 93,952 | |
Goldman Sachs Bank USA | | | BRL | | | | 11,687 | | | | USD | | | | 4,400 | | | | 1/05/15 | | | | 3,310 | |
Goldman Sachs Bank USA | | | USD | | | | 4,402 | | | | BRL | | | | 11,687 | | | | 1/05/15 | | | | (5,299 | ) |
Goldman Sachs Bank USA | | | JPY | | | | 4,541,400 | | | | USD | | | | 39,753 | | | | 1/15/15 | | | | 1,835,836 | |
Goldman Sachs Bank USA | | | KRW | | | | 7,237,597 | | | | USD | | | | 6,701 | | | | 1/15/15 | | | | 109,075 | |
Goldman Sachs Bank USA | | | USD | | | | 18,495 | | | | AUD | | | | 21,131 | | | | 1/15/15 | | | | (1,255,913 | ) |
Goldman Sachs Bank USA | | | BRL | | | | 11,687 | | | | USD | | | | 4,364 | | | | 2/03/15 | | | | 1,810 | |
HSBC Bank USA | | | USD | | | | 10,980 | | | | GBP | | | | 6,842 | | | | 1/15/15 | | | | (317,240 | ) |
JPMorgan Chase Bank | | | BRL | | | | 11,687 | | | | USD | | | | 4,589 | | | | 1/05/15 | | | | 192,762 | |
JPMorgan Chase Bank | | | USD | | | | 4,400 | | | | BRL | | | | 11,687 | | | | 1/05/15 | | | | (3,310 | ) |
Morgan Stanley & Co., Inc. | | | USD | | | | 4,612 | | | | EUR | | | | 3,678 | | | | 1/15/15 | | | | (160,893 | ) |
Royal Bank of Scotland PLC | | | EUR | | | | 12,303 | | | | USD | | | | 15,460 | | | | 1/15/15 | | | | 571,398 | |
Royal Bank of Scotland PLC | | | USD | | | | 22,516 | | | | CHF | | | | 21,591 | | | | 1/15/15 | | | | (796,312 | ) |
Royal Bank of Scotland PLC | | | USD | | | | 16,097 | | | | NZD | | | | 20,579 | | | | 1/15/15 | | | | (58,853 | ) |
Standard Chartered Bank | | | CNY | | | | 83,838 | | | | USD | | | | 13,623 | | | | 1/15/15 | | | | 76,337 | |
Standard Chartered Bank | | | JPY | | | | 2,170,455 | | | | USD | | | | 20,000 | | | | 1/15/15 | | | | 1,878,178 | |
Standard Chartered Bank | | | KRW | | | | 2,651,814 | | | | USD | | | | 2,527 | | | | 1/15/15 | | | | 111,549 | |
Standard Chartered Bank | | | USD | | | | 1,382 | | | | CNY | | | | 8,513 | | | | 1/15/15 | | | | (6,741 | ) |
Standard Chartered Bank | | | USD | | | | 1,636 | | | | HKD | | | | 12,689 | | | | 1/15/15 | | | | (182 | ) |
State Street Bank & Trust Co. | | | USD | | | | 4,706 | | | | CHF | | | | 4,496 | | | | 1/15/15 | | | | (183,169 | ) |
State Street Bank & Trust Co. | | | USD | | | | 1,804 | | | | EUR | | | | 1,411 | | | | 1/15/15 | | | | (96,769 | ) |
State Street Bank & Trust Co. | | | USD | | | | 1,245 | | | | HKD | | | | 9,650 | | | | 1/15/15 | | | | (240 | ) |
State Street Bank & Trust Co. | | | USD | | | | 4,311 | | | | NOK | | | | 28,019 | | | | 1/15/15 | | | | (552,785 | ) |
UBS AG | | | EUR | | | | 6,566 | | | | USD | | | | 8,511 | | | | 1/15/15 | | | | 565,010 | |
UBS AG | | | USD | | | | 6,761 | | | | CHF | | | | 6,416 | | | | 1/15/15 | | | | (306,732 | ) |
UBS AG | | | USD | | | | 2,260 | | | | NZD | | | | 2,929 | | | | 1/15/15 | | | | 22,671 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 748,767 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2014, the market value of this security amounted to $2,329,425 or 0.4% of net assets. |
(d) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
(e) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
11
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Currency Abbreviations:
AUD—Australian Dollar
BRL—Brazilian Real
CHF—Swiss Franc
CNY—Chinese Yuan Renminbi
EUR—Euro
GBP—Great British Pound
HKD—Hong Kong Dollar
JPY—Japanese Yen
KRW—South Korean Won
NOK—Norwegian Krone
NZD—New Zealand Dollar
RUB—Russian Ruble
SEK—Swedish Krona
USD—United States Dollar
Glossary:
ADR—American Depositary Receipt
REG—Registered Shares
See notes to financial statements.
12
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $642,356,183) | | $ | 662,772,519 | (a) |
Affiliated issuers (cost $10,876,567—investment of cash collateral for securities loaned) | | | 10,876,567 | |
Due from broker | | | 244,804 | (b) |
Foreign currencies, at value (cost $2,049,922) | | | 1,951,113 | |
Unrealized appreciation on forward currency exchange contracts | | | 8,797,275 | |
Dividends and interest receivable | | | 2,660,430 | |
Receivable for investment securities sold and foreign currency transactions | | | 492,305 | |
Receivable for capital stock sold | | | 10,268 | |
| | | | |
Total assets | | | 687,805,281 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 10,876,567 | |
Unrealized depreciation on forward currency exchange contracts | | | 8,048,508 | |
Payable for investment securities purchased and foreign currency transactions | | | 1,486,052 | |
Advisory fee payable | | | 432,815 | |
Payable for capital stock redeemed | | | 394,855 | |
Distribution fee payable | | | 133,391 | |
Administrative fee payable | | | 12,310 | |
Payable for variation margin on exchange-traded derivatives | | | 485 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 233,794 | |
| | | | |
Total liabilities | | | 21,618,889 | |
| | | | |
NET ASSETS | | $ | 666,186,392 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 49,654 | |
Additional paid-in capital | | | 1,677,427,739 | |
Distributions in excess of net investment income | | | (1,807,034 | ) |
Accumulated net realized loss on investment and foreign currency transactions | | | (1,030,514,328 | ) |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 21,030,361 | |
| | | | |
| | $ | 666,186,392 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 50,504,177 | | | | 3,734,026 | | | $ | 13.53 | |
B | | $ | 615,682,215 | | | | 45,920,245 | | | $ | 13.41 | |
(a) | | Includes securities on loan with a value of $10,626,840 (see Note E). |
(b) | | Represents amounts on deposit at the broker as collateral for open derivative contracts. |
See notes to financial statements.
13
| | |
INTERNATIONAL VALUE PORTFOLIO |
STATEMENTOF OPERATIONS |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $2,048,808) | | $ | 30,340,128 | |
Affiliated issuers | | | 12,147 | |
Interest | | | 20 | |
Securities lending income | | | 509,557 | |
| | | | |
| | | 30,861,852 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 5,571,673 | |
Distribution fee—Class B | | | 1,719,739 | |
Transfer agency—Class A | | | 588 | |
Transfer agency—Class B | | | 7,328 | |
Custodian | | | 251,356 | |
Printing | | | 239,639 | |
Audit and tax | | | 62,263 | |
Legal | | | 56,357 | |
Administrative | | | 49,439 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 35,854 | |
| | | | |
Total expenses | | | 7,998,739 | |
| | | | |
Net investment income | | | 22,863,113 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 69,377,466 | (a) |
Futures | | | 120,298 | |
Foreign currency transactions | | | (1,513,673 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | (134,414,673 | ) |
Futures | | | (18,253 | ) |
Foreign currency denominated assets and liabilities | | | (1,952,142 | ) |
| | | | |
Net loss on investment and foreign currency transactions | | | (68,400,977 | ) |
| | | | |
NET DECREASE IN NET ASSETS FROM OPERATIONS | | $ | (45,537,864 | ) |
| | | | |
(a) | | Net of foreign capital gains taxes of $86,516. |
See notes to financial statements.
14
| | |
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 22,863,113 | | | $ | 20,322,182 | |
Net realized gain on investment and foreign currency transactions | | | 67,984,091 | | | | 104,857,249 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | (136,385,068 | ) | | | 67,180,778 | |
| | | | | | | | |
Net increase (decrease) in net assets from operations | | | (45,537,864 | ) | | | 192,360,209 | |
DIVIDENDS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (1,959,658 | ) | | | (3,119,249 | ) |
Class B | | | (22,620,339 | ) | | | (48,329,623 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (65,935,109 | ) | | | (444,999,837 | ) |
| | | | | | | | |
Total decrease | | | (136,052,970 | ) | | | (304,088,500 | ) |
NET ASSETS | | | | | | | | |
Beginning of period | | | 802,239,362 | | | | 1,106,327,862 | |
| | | | | | | | |
End of period (including distributions in excess of net investment income of ($1,807,034) and undistributed net investment income of $1,508,872, respectively) | | $ | 666,186,392 | | | $ | 802,239,362 | |
| | | | | | | | |
See notes to financial statements.
15
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein International Value Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement
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| | AllianceBernstein Variable Products Series Fund |
date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stock: | | | | | | | | | | | | | | | | |
Financials | | $ | 2,148,799 | | | $ | 158,675,737 | | | $ | –0 | – | | $ | 160,824,536 | |
Consumer Discretionary | | | 14,990,281 | | | | 92,381,380 | | | | –0 | – | | | 107,371,661 | |
Industrials | | | –0 | – | | | 85,854,702 | | | | –0 | – | | | 85,854,702 | |
Health Care | | | 146,303 | | | | 63,572,897 | | | | –0 | – | | | 63,719,200 | |
Telecommunication Services | | | –0 | – | | | 53,776,227 | | | | –0 | – | | | 53,776,227 | |
Information Technology | | | –0 | – | | | 51,796,737 | | | | –0 | – | | | 51,796,737 | |
Materials | | | –0 | – | | | 47,896,725 | | | | –0 | – | | | 47,896,725 | |
Energy | | | 2,352,301 | | | | 43,418,962 | | | | –0 | – | | | 45,771,263 | |
Consumer Staples | | | –0 | – | | | 26,105,588 | | | | –0 | – | | | 26,105,588 | |
Utilities | | | –0 | – | | | 13,349,836 | | | | –0 | – | | | 13,349,836 | |
Short-Term Investments | | | –0 | – | | | 6,306,044 | | | | –0 | – | | | 6,306,044 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 10,876,567 | | | | –0 | – | | | –0 | – | | | 10,876,567 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 30,514,251 | | | | 643,134,835 | + | | | –0 | – | | | 673,649,086 | |
Other Financial Instruments*: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Futures | | | –0 | – | | | 104,721 | | | | –0 | – | | | 104,721 | # |
Forward Currency Exchange Contracts | | | –0 | – | | | 8,797,275 | | | | –0 | – | | | 8,797,275 | |
Liabilities: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | | –0 | – | | | (8,048,508 | ) | | | –0 | – | | | (8,048,508 | ) |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 30,514,251 | | | $ | 643,988,323 | | | $ | –0 | – | | $ | 674,502,574 | |
| | | | | | | | | | | | | | | | |
* | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
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INTERNATIONAL VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
+ | | A significant portion of the Portfolio’s foreign equity investments are categorized as Level 2 investments since they are valued using fair value prices based on third party vendor modeling tools to the extent available, see Note A.1. |
# | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
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5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2014, there were no expenses waived by the Adviser.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $49,439.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $985,467, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
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INTERNATIONAL VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 467,224,629 | | | $ | 534,989,445 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding futures and foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 656,722,941 | |
| | | | |
Gross unrealized appreciation | | | 58,567,841 | |
Gross unrealized depreciation | | | (41,641,696 | ) |
| | | | |
Net unrealized appreciation | | $ | 16,926,145 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The principal types of derivatives utilized by the Portfolio, as well as the methods in which they may be used are:
The Portfolio may buy or sell futures for investment purposes or for the purpose of hedging its portfolio against adverse effects of potential movements in the market. The Portfolio bears the market risk that arises from changes in the value of these instruments and the imperfect correlation between movements in the price of the futures and movements in the price of the assets, reference rates or indices which they are designed to track. Among other things, the Portfolio may purchase or sell futures for foreign currencies or options thereon for non-hedging purposes as a means of making direct investment in foreign currencies, as described below under “Currency Transactions”.
At the time the Portfolio enters into futures, the Portfolio deposits and maintains as collateral an initial margin with the broker, as required by the exchange on which the transaction is effected. Such amount is shown as due from broker on the statement of assets and liabilities. Pursuant to the contract, the Portfolio agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolio as unrealized gains or losses. Risks may arise from the potential inability of a counterparty to meet the terms of the contract. The credit/counterparty risk for exchange-traded futures is generally less than privately negotiated futures, since the clearinghouse, which is the issuer or counterparty to each exchange-traded future, has robust risk mitigation standards, including the requirement to provide initial and variation margin. When the contract is closed, the Portfolio records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the time it was closed.
Use of long futures subjects the Portfolio to risk of loss in excess of the amounts shown on the statement of assets and liabilities, up to the notional value of the futures. Use of short futures subjects the Portfolio to unlimited risk of loss. Under some circumstances, futures exchanges may establish daily limits on the amount that the price of futures can vary from the previous day’s settlement price, which could effectively prevent liquidation of unfavorable positions.
During the year ended December 31, 2014, the Portfolio held futures for non-hedging purposes.
| • | | Forward Currency Exchange Contracts |
The Portfolio may enter into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to hedge certain firm purchase and sale commitments denominated in foreign currencies and for non-hedging purposes as a means of making direct investments in foreign currencies, as described below under “Currency Transactions”.
A forward currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract would be included in net realized gain or loss on foreign currency transactions. Fluctuations in the value of open forward currency exchange contracts are recorded for financial reporting purposes as unrealized
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appreciation and/or depreciation by the Portfolio. 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.
During the year ended December 31, 2014, the Portfolio held forward currency exchange contracts for hedging and non-hedging purposes.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) or similar master agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Portfolio typically may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default or termination.
Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as exchange-traded derivative transactions, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Portfolio and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party. In the event of a default by a Master Agreements counterparty, the return of collateral with market value in excess of the Portfolio’s net liability, held by the defaulting party, may be delayed or denied.
The Portfolio’s Master Agreements may contain provisions for early termination of OTC derivative transactions in the event the net assets of the Portfolio decline below specific levels (“net asset contingent features”). If these levels are triggered, the Portfolio’s counterparty has the right to terminate such transaction and require the Portfolio to pay or receive a settlement amount in connection with the terminated transaction. For additional details, please refer to netting arrangements by counterparty tables below.
At December 31, 2014, the Portfolio had entered into the following derivatives:
| | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives | |
Derivative Type | | Statement of Assets and Liabilities Location | | Fair Value | | | Statement of Assets and Liabilities Location | | Fair Value | |
Equity contracts | | Receivable/Payable for variation margin on exchange-traded derivatives | | $ | 104,721 | * | | | | | | |
Foreign exchange contracts | | Unrealized appreciation on forward currency exchange contracts | | | 8,797,275 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 8,048,508 | |
| | | | | | | | | | | | |
Total | | | | $ | 8,901,996 | | | | | $ | 8,048,508 | |
| | | | | | | | | | | | |
* | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative appreciation/(depreciation) of exchange-traded derivatives as reported in the portfolio of investments. |
The effect of derivative instruments on the statement of operations for the year ended December 31, 2014:
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives | | Realized Gain or (Loss) on Derivatives | | | Change in Unrealized Appreciation or (Depreciation) | |
Equity contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | $ | 120,298 | | | $ | (18,253 | ) |
Foreign exchange contracts | | Net realized gain (loss) on foreign currency transactions; Net change in unrealized appreciation/depreciation of foreign currency denominated assets and liabilities | | | (900,170 | ) | | | (1,587,063 | ) |
| | | | | | | | | | |
Total | | | | $ | (779,872 | ) | | $ | (1,605,316 | ) |
| | | | | | | | | | |
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INTERNATIONAL VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2014:
| | | | |
Futures: | | | | |
Average original value of buy contracts | | $ | 2,579,722 | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 210,871,759 | |
Average principal amount of sale contracts | | $ | 216,586,599 | |
For financial reporting purposes, the Portfolio does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the statement of assets and liabilities.
All derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by counterparty net of amounts available for offset under Master Agreements (“MA”) and net of the related collateral received/ pledged by the Portfolio as of December 31, 2014:
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Received | | | Security Collateral Received | | | Net Amount of Derivatives Assets | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Barclays Bank PLC | | $ | 462,134 | | | $ | (358,499 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 103,635 | |
BNP Paribas SA | | | 1,436,511 | | | | (1,436,511 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Citibank | | | 806,294 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 806,294 | |
Credit Suisse International | | | 630,448 | | | | (630,448 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Deutsche Bank AG | | | 93,952 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 93,952 | |
Goldman Sachs Bank USA | | | 1,950,031 | | | | (1,261,212 | ) | | | –0 | – | | | –0 | – | | | 688,819 | |
JPMorgan Chase Bank | | | 192,762 | | | | (3,310 | ) | | | –0 | – | | | –0 | – | | | 189,452 | |
Royal Bank of Scotland PLC | | | 571,398 | | | | (571,398 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Standard Chartered Bank | | | 2,066,064 | | | | (6,923 | ) | | | –0 | – | | | –0 | – | | | 2,059,141 | |
UBS AG | | | 587,681 | | | | (306,732 | ) | | | –0 | – | | | –0 | – | | | 280,949 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 8,797,275 | | | $ | (4,575,033 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 4,222,242 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities Subject to a MA | | | Derivative Available for Offset | | | Cash Collateral Pledged* | | | Security Collateral Pledged | | | Net Amount of Derivatives Liabilities | |
Exchange-Traded Derivatives: | | | | | | | | | | | | | | | | | | | | |
Goldman Sachs & Co** | | $ | 485 | | | $ | –0 | – | | $ | (485 | ) | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 485 | | | $ | –0 | – | | $ | (485 | ) | | $ | –0 | – | | $ | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
OTC Derivatives: | | | | | | | | | | | | | | | | | | | | |
Bank of America, NA | | $ | 1,274,929 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 1,274,929 | |
Barclays Bank PLC | | | 358,499 | | | | (358,499 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
BNP Paribas SA | | | 1,680,478 | | | | (1,436,511 | ) | | | –0 | – | | | –0 | – | | | 243,967 | |
Credit Suisse International | | | 990,164 | | | | (630,448 | ) | | | –0 | – | | | –0 | – | | | 359,716 | |
Goldman Sachs Bank USA | | | 1,261,212 | | | | (1,261,212 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
HSBC Bank USA | | | 317,240 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 317,240 | |
JPMorgan Chase Bank | | | 3,310 | | | | (3,310 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley & Co., Inc. | | | 160,893 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 160,893 | |
Royal Bank of Scotland PLC | | | 855,165 | | | | (571,398 | ) | | | –0 | – | | | –0 | – | | | 283,767 | |
Standard Chartered Bank | | | 6,923 | | | | (6,923 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 832,963 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 832,963 | |
UBS AG | | | 306,732 | | | | (306,732 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 8,048,508 | | | $ | (4,575,033 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 3,473,475 | ^ |
| | | | | | | | | | | | | | | | | | | | |
* | | The actual collateral received/pledged may be more than the amount reported due to overcollateralization. |
** | | Cash has been posted for initial margin requirements for exchange traded derivatives outstanding at December 31, 2014. |
^ | | Net amount represents the net receivable/payable that would be due from/to the counterparty in the event of default or termination. The net amount from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same counterparty. |
22
| | |
| | AllianceBernstein Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $10,626,840 and had received cash collateral which has been invested into AB Exchange Reserves of $10,876,567. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $509,557 and $12,147 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 9,971 | | | $ | 336,596 | | | $ | 335,690 | | | $ | 10,877 | |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 371,734 | | | | 704,487 | | | | | $ | 5,495,507 | | | $ | 10,092,196 | |
Shares issued in reinvestment of dividends | | | 140,849 | | | | 219,705 | | | | | | 1,959,658 | | | | 3,119,249 | |
Shares redeemed | | | (697,255 | ) | | | (711,972 | ) | | | | | (10,349,606 | ) | | | (9,889,977 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (184,672 | ) | | | 212,220 | | | | | $ | (2,894,441 | ) | | $ | 3,321,468 | |
| | | | | | | | | | | | | | | | | | |
23
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 3,108,865 | | | | 1,604,342 | | | | | $ | 45,153,950 | | | $ | 21,719,600 | |
Shares issued in reinvestment of dividends | | | 1,636,841 | | | | 3,444,995 | | | | | | 22,620,339 | | | | 48,329,623 | |
Shares redeemed | | | (8,876,905 | ) | | | (37,407,549 | ) | | | | | (130,814,957 | ) | | | (518,370,528 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (4,131,199 | ) | | | (32,358,212 | ) | | | | $ | (63,040,668 | ) | | $ | (448,321,305 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 24,579,997 | | | $ | 51,448,872 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 24,579,997 | | | $ | 51,448,872 | |
| | | | | | | | |
24
| | |
| | AllianceBernstein Variable Products Series Fund |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 1,472,199 | |
Accumulated capital and other losses | | | (1,029,442,451 | )(a) |
Unrealized appreciation/(depreciation) | | | 16,679,251 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | (1,011,291,001 | ) |
| | | | |
(a) | | As of December 31, 2014, the Portfolio had a net capital loss carryforward of $1,029,442,451. During the fiscal year, the Portfolio utilized $69,211,043 of capital loss carryforwards to offset current year net realized gains. |
(b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of gains/losses on certain derivative instruments, and the tax treatment of passive foreign investment companies (PFICs). |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation.
As of December 31, 2014, the Portfolio had a net capital loss carryforward of $1,029,442,451 which will expire as follows:
| | | | |
SHORT-TERM AMOUNT | | LONG-TERM AMOUNT | | EXPIRATION |
$ 41,335,504 | | n/a | | 2016 |
917,130,062 | | n/a | | 2017 |
50,169,345 | | n/a | | 2018 |
20,807,540 | | $0 | | no expiration |
During the current fiscal year, permanent differences primarily due to reclassifications of foreign currency and foreign capital gains tax, and the tax treatment of passive foreign investment companies (PFICs) resulted in a net increase in distributions in excess of net investment income, and a net decrease in accumulated net realized loss on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
25
| | |
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $14.99 | | | | $12.96 | | | | $11.50 | | | | $14.90 | | | | $14.70 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .48 | | | | .33 | | | | .36 | | | | .36 | | | | .27 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (1.40 | ) | | | 2.59 | | | | 1.31 | | | | (3.19 | ) | | | .39 | † |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | (.92 | ) | | | 2.92 | | | | 1.67 | | | | (2.83 | ) | | | .66 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.54 | ) | | | (.89 | ) | | | (.21 | ) | | | (.56 | ) | | | (.46 | ) |
Tax return of capital | | | –0 | – | | | –0 | – | | | –0 | – | | | (.01 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.54 | ) | | | (.89 | ) | | | (.21 | ) | | | (.57 | ) | | | (.46 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $13.53 | | | | $14.99 | | | | $12.96 | | | | $11.50 | | | | $14.90 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | (6.21 | )% | | | 23.00 | % | | | 14.53 | % | | | (19.25 | )% | | | 4.59 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $50,504 | | | | $58,723 | | | | $48,029 | | | | $62,003 | | | | $104,274 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .85 | % | | | .82 | % | | | .81 | % | | | .82 | % | | | .85 | %+ |
Net investment income | | | 3.25 | % | | | 2.33 | % | | | 2.97 | % | | | 2.55 | % | | | 1.94 | %+ |
Portfolio turnover rate | | | 64 | % | | | 59 | % | | | 41 | % | | | 62 | % | | | 52 | % |
See footnote summary on page 27.
26
| | |
| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $14.86 | | | | $12.84 | | | | $11.40 | | | | $14.77 | | | | $14.54 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .45 | | | | .30 | | | | .32 | | | | .31 | | | | .24 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | (1.40 | ) | | | 2.56 | | | | 1.29 | | | | (3.14 | ) | | | .38 | † |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | (.95 | ) | | | 2.86 | | | | 1.61 | | | | (2.83 | ) | | | .62 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.50 | ) | | | (.84 | ) | | | (.17 | ) | | | (.53 | ) | | | (.39 | ) |
Tax return of capital | | | –0 | – | | | –0 | – | | | –0 | – | | | (.01 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.50 | ) | | | (.84 | ) | | | (.17 | ) | | | (.54 | ) | | | (.39 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $13.41 | | | | $14.86 | | | | $12.84 | | | | $11.40 | | | | $14.77 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | (6.46 | )% | | | 22.73 | % | | | 14.19 | % | | | (19.44 | )% | | | 4.30 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000,000’s omitted) | | | $616 | | | | $744 | | | | $1,058 | | | | $1,033 | | | | $1,326 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.10 | % | | | 1.07 | % | | | 1.06 | % | | | 1.07 | % | | | 1.10 | %+ |
Net investment income | | | 3.06 | % | | | 2.20 | % | | | 2.70 | % | | | 2.23 | % | | | 1.73 | %+ |
Portfolio turnover rate. | | | 64 | % | | | 59 | % | | | 41 | % | | | 62 | % | | | 52 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
† | | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accord with the Portfolio’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
27
| | |
| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein International Value Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein International Value Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein International Value Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
28
| | |
| | |
| | |
2014 TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the earnings of the Portfolio for the taxable year ended December 31, 2014.
The Portfolio intends to make an election to pass through foreign taxes to its shareholders. For the taxable year ended December 31, 2014, $1,037,012 of foreign taxes may be passed through and the associated foreign source income for information reporting purposes is $18,170,161.
29
| | |
| | |
| | |
INTERNATIONAL VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman | | Nancy P. Jacklin(1) |
John H. Dobkin(1) | | Robert M. Keith, President and Chief Executive Officer |
Michael J. Downey(1) | | Garry L. Moody(1) |
William H. Foulk, Jr.(1) | | Earl D. Weiner(1) |
D. James Guzy(1) | | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Takeo Aso(2), Vice President Avi Lavi(2), Vice President Kevin F. Simms(2), Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
| | |
CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the International Value Senior Investment Management Team. Mr. Takeo Aso, Mr. Avi Lavi and Mr. Kevin F. Simms are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
30
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| | |
INTERNATIONAL VALUE PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
| | | | | | | | |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2006, and interim CEO 1999-2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014 |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001-2008. | | | 116 | | | None |
| | | | | | | | |
31
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
32
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
| | | | | | | | |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
33
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| | |
INTERNATIONAL VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Takeo Aso 50 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Avi Lavi 48 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Kevin F. Simms 48 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | | The address for each of the Portfolio Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABI and ABIS are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
34
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INTERNATIONAL VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein International Value Portfolio (the “Portfolio”)2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees”.3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($MIL) | |
International Value Portfolio | | International | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | $ | 776.9 | |
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
35
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INTERNATIONAL VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $55,155 (0.006% of the Portfolio’s average daily net assets) for such services.
The Adviser has agreed to waive that portion of its management fees and/or reimburse the Portfolio for that portion of its total operating expenses to the degree necessary to limit the Portfolio’s expense ratios to the amounts set forth below for the Portfolio’s fiscal year. The waiver is terminable by the Adviser upon at least 60 days’ notice prior to the Portfolio’s prospectus update. The Portfolio was operating below its expense caps for the most recent fiscal year; accordingly the expense limitation undertaking of the Portfolio was of no effect. In addition, set forth below are the gross expense ratios of the Portfolio for the most recently completed fiscal year:
| | | | | | | | |
Portfolio | | Expense Cap Pursuant to Expense Limitation Undertaking | | Gross Expense Ratio | | | Fiscal Year End |
International Value Portfolio | | Class A 1.20% | | | 0.82% | | | December 31 |
| | Class B 1.45% | | | 1.07% | | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
36
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| | AllianceBernstein Variable Products Series Fund |
addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($MIL) | | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
International Value Portfolio | | $ | 776.9 | | | International Value Schedule | | | 0.426 | % | | | 0.750 | % |
| | | | | | 0.80% on first $25m | | | | | | | | |
| | | | | | 0.60% on the next $25m | | | | | | | | |
| | | | | | 0.50% on the next $50m | | | | | | | | |
| | | | | | 0.40% on the balance | | | | | | | | |
| | | | | | Minimum account size $25m | | | | | | | | |
The Adviser also manages AllianceBernstein Trust, Inc.—International Value Fund (“International Value Fund”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of International Value Fund and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
International Value Portfolio | | International Value Fund | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750% | | | | 0.750% | |
The Adviser manages Sanford C. Bernstein Fund, Inc. (“SCB Fund”), an open-end management investment company. The International Portfolio of SCB Fund (“SCB International Portfolio”) has a somewhat similar investment style as the Portfolio. Set forth below are the fee schedule of SCB International Portfolio and what would have been the effective advisory fee of the Portfolio had the fee schedule of SCB International Portfolio been applicable to the Portfolio based on March 31, 2014 net assets:
| | | | | | | | | | | | |
Portfolio | | SCB Fund Portfolio | | Fee Schedule | | SCB Fund Effective Fee | | | Portfolio Advisory Fee | |
International Value Portfolio7 | | International Portfolio | | 0.925% on 1st $1 billion 0.850% on next $3 billion | | | 0.875% | | | | 0.750% | |
| | | | 0.800% on next $2 billion | | | | | | | | |
| | | | 0.750% on next $2 billion | | | | | | | | |
| | | | 0.650% thereafter | | | | | | | | |
| | | | The Adviser is waving 5 basis points in advisory fees effective through October 31, 2014. | | | | | | | | |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families. The Adviser charges the fees set forth below for the sub-advisory relationship that has a somewhat similar investment style as the Portfolio. Also shown are the Portfolio’s advisory fee and what would have been the effective advisory fee of the Portfolio had the fee schedule of the sub-advisory relationship been applicable to the Portfolio based on March 31, 2014 net assets.
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The investment guidelines of the Portfolio are more restrictive than the SCB Fund portfolio. The Portfolio invests primarily in either growth or value equity securities, in contrast to the SCB Fund portfolio, which invests in both growth and value equity securities. |
37
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INTERNATIONAL VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
Portfolio | | | | Fee Schedule | | Effective Sub-Adv. Fee | | | Portfolio Advisory Fee | |
International Value Portfolio | | Client #18 | | 0.60% on first $1 billion | | | 0.600% | | | | 0.750% | |
| | | | 0.55% on next $ 500 million | | | | | | | | |
| | | | 0.50% on next $ 500 million | | | | | | | | |
| | | | 0.45% on next $ 500 million | | | | | | | | |
| | | | 0.40% on the balance | | | | | | | | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser. In addition, to the extent that the sub-advisory relationship is with an affiliate of the Adviser, the fee schedule may not reflect arm’s length bargaining or negotiations.
While it appears that the sub-advisory relationship is paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such lower fees due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationship. There could be various business reasons why an investment adviser would be willing to provide a sub-advisory relationship investment related services at a different fee level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management, generally required by a registered investment company.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.9 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.10,11
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
The Portfolio’s original EG had an insufficient number of peers. Consequently, Lipper expanded the Portfolio’s EG to include peers that have a similar but not the same Lipper classification/objective as the Portfolio. However, because Lipper had expanded the Portfolio’s EG, under Lipper’s standard guidelines, the Portfolio’s Lipper Expense Universe (“EU”) was also expanded to include universes of those peers that had a similar but not the same Lipper investment objective/classification. A “normal” EU will include funds that have the same investment objective/classification as the subject portfolio.12
8 | | The client is an affiliate of the Adviser. |
9 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
10 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
11 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
12 | | The Portfolio’s EG includes the Portfolio, four other VIP International Value funds (“IFVE”), four VIP International Growth funds (“IFGE”) and two VIP International Core funds (“IFCE”). |
38
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee13 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
International Value Portfolio | | | 0.750 | | | | 0.807 | | | | 5/11 | |
Because Lipper had expanded the EG of the Portfolio, under Lipper’s standard guidelines, the Lipper Expense Universe (“EU”) was also expanded to include the universes of those peers that had a similar but not the same Lipper investment classification/objective.14 A “normal” EU will include funds that have the same investment classification/objective as the subject Portfolio.15
Set forth below is a comparison of the Portfolio’s total expense ratio and the medians of the Portfolio’s EG and EU. The Portfolio’s total expense ratio ranking is also shown in the table below.
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)16 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
International Value Portfolio | | | 0.823 | | | | 0.887 | | | | 3/11 | | | | 0.897 | | | | 6/22 | |
Based on this analysis, the Portfolio has a more favorable ranking on a total expense ratio basis than on a contractual management fee basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio decreased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $2,181,857 in Rule 12b-1 fees.
13 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. In addition, the contractual management fee does not reflect any advisory fee waiver or expense cap that would effectively reduce the actual management fee. |
14 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
15 | | The Portfolio’s EU includes the Portfolio, EG and all other VIP IFVE, IFGE and IFCE funds, excluding outliers. |
16 | | Most recently completed fiscal year end Class A total expense ratio. |
39
| | |
INTERNATIONAL VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $5,353,827 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.17
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.18,19 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.20 The independent consultant then
17 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
18 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
19 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
20 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
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| | AllianceBernstein Variable Products Series Fund |
discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio21 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)22 for the periods ended February 28, 2014.23
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
International Value Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 21.82 | | | | 21.82 | | | | 22.06 | | | | 3/5 | | | | 13/23 | |
3 year | | | 2.61 | | | | 6.68 | | | | 6.68 | | | | 4/5 | | | | 18/21 | |
5 year | | | 15.86 | | | | 18.59 | | | | 17.63 | | | | 4/4 | | | | 16/19 | |
10 year | | | 4.45 | | | | 4.45 | | | | 5.68 | | | | 1/1 | | | | 9/9 | |
Set forth below are the 1, 3, 5 and 10 year and since inception performance returns of the Portfolio (in bold)24 versus its benchmark.25 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.26
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
International Value Portfolio | | | 21.82 | | | | 2.62 | | | | 15.86 | | | | 4.45 | | | | 6.22 | | | | 21.51 | | | | 0.24 | | | | 10 | |
MSCI EAFE Index (Net) | | | 19.28 | | | | 6.63 | | | | 17.60 | | | | 6.66 | | | | 5.36 | | | | 18.18 | | | | 0.36 | | | | 10 | |
Inception Date: May 10, 2001 | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
21 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
22 | | The Portfolio’s PG/PU is not identical to the Portfolio’s EG/EU as the criteria for including/excluding a fund in/from a PG/PU is somewhat different from that of an EG/EU. |
23 | | Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
24 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
25 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
26 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
41
VPS-IV-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | LARGE CAP GROWTH PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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LARGE CAP GROWTH PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Large Cap Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies. The Portfolio invests primarily in the domestic equity securities of companies selected by AllianceBernstein L.P. (the “Adviser”) for their growth potential within various market sectors. The Portfolio emphasizes investments in large, seasoned companies. Under normal circumstances, the Portfolio will invest at least 80% of its net assets in common stocks of large-capitalization companies.
The Adviser expects that normally the Portfolio will tend to emphasize investments in securities issued by U.S. companies, although it may invest in foreign securities. The Adviser’s research focus is on companies with high sustainable growth prospects, high or improving return on invested capital, transparent business models, and strong and lasting competitive advantages.
The Portfolio may, at times, invest in shares of exchange-traded funds, or ETFs, in lieu of making direct investments in securities. ETFs may provide more efficient and economical exposure to the types of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
The Portfolio may enter into derivatives transactions, such as options, futures contracts, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of ETFs. These transactions may be used, for example, in an effort to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Portfolio’s portfolio from a decline in value, sometimes within certain ranges.
INVESTMENT RESULTS
The table on page 3 shows the Portfolio’s performance compared to its benchmark, the Russell 1000 Growth Index, in addition to the broad market as measured by the Standard & Poor’s (“S&P”) 500 Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio outperformed the benchmark for the annual reporting period. Security selection was responsible for most of the premium, though sector allocation also contributed. Stock selection in the health care and consumer-driven sectors boosted relative performance. Stock selection in industrials and financials offset some of the gains.
The Portfolio did not utilize derivatives during the annual reporting period.
MARKET REVIEW AND INVESTMENT STRATEGY
U.S. equity markets advanced for much of 2014 as a brightening U.S. economic outlook boosted risk appetites. Six years after the collapse of the global financial markets, investors grew increasingly confident that the U.S. economy was strengthening, buoyed by encouraging domestic data, strong corporate earnings and a slew of mergers and acquisitions activity. Though the U.S. Federal Reserve (the “Fed”) ended its quantitative easing program in October after gradually reducing its monthly government bond purchases during the course of the year, investors remained upbeat about U.S. stocks, as the Fed’s repeated commitment to its ultralow interest rate policy until at least mid-2015 allayed market anxiety about a premature end to the central bank’s stimulus campaign.
The Large Cap Growth Team follows a bottom-up stock picking methodology that seeks to identify companies that meet the Portfolio’s investment criteria of healthy balance sheets, competitive advantages, strong cash-flow generation, transparent business models and sustainable growth. The Portfolio is conservatively positioned amid the current uncertainty in the global macro environment.
1
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LARGE CAP GROWTH PORTFOLIO | | |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
Neither the unmanaged Russell 1000® Growth Index nor the unmanaged S&P 500® Index reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Growth Index represents the performance of 1,000 large-cap growth companies within the U.S. The S&P 500 Index includes 500 U.S. stocks and is a common representation of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.
Focused Portfolio Risk: Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Portfolio’s, net asset value, (“NAV”).
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Derivatives Risk: Investments in derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Management Risk: The Portfolio is subject to management risk because it is an actively managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
2
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LARGE CAP GROWTH PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
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THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Large Cap Growth Portfolio Class A† | | | 14.14% | | | | 14.26% | | | | 7.76% | |
Large Cap Growth Portfolio Class B† | | | 13.84% | | | | 13.98% | | | | 7.48% | |
Russell 1000 Growth Index | | | 13.05% | | | | 15.81% | | | | 8.49% | |
S&P 500 Index | | | 13.69% | | | | 15.45% | | | | 7.67% | |
* Average annual returns. † Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014 by 0.02%. Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved through favorable market conditions. | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.85% and 1.10% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
LARGE CAP GROWTH PORTFOLIO CLASS A GROWTH OF A $10,000 INVESTMENT (unaudited)
12/31/04 – 12/31/14
This chart illustrates the total value of an assumed $10,000 investment in Large Cap Growth Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the Russell 1000 Growth Index, and the broad market, as represented by the S&P 500 Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 2.
3
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LARGE CAP GROWTH PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,092.10 | | | $ | 4.32 | | | | 0.82 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.07 | | | $ | 4.18 | | | | 0.82 | % |
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Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,090.70 | | | $ | 5.64 | | | | 1.07 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.81 | | | $ | 5.45 | | | | 1.07 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
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LARGE CAP GROWTH PORTFOLIO |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Apple, Inc. | | $ | 25,055,598 | | | | 5.9 | % |
Visa, Inc.—Class A | | | 16,112,190 | | | | 3.8 | |
Google, Inc. | | | 15,725,867 | | | | 3.7 | |
CVS Health Corp. | | | 15,439,841 | | | | 3.6 | |
Allergan, Inc./United States | | | 15,099,417 | | | | 3.5 | |
Monster Beverage Corp. | | | 12,560,582 | | | | 2.9 | |
Comcast Corp.—Class A | | | 12,286,518 | | | | 2.9 | |
UnitedHealth Group, Inc. | | | 12,082,378 | | | | 2.8 | |
Gilead Sciences, Inc. | | | 11,711,805 | | | | 2.8 | |
Priceline Group, Inc. (The) | | | 11,538,925 | | | | 2.7 | |
| | | | | | | | |
| | $ | 147,613,121 | | | | 34.6 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
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SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Technology | | $ | 91,664,197 | | | | 21.2 | % |
Consumer Discretionary | | | 85,639,774 | | | | 19.8 | |
Health Care | | | 72,976,167 | | | | 16.9 | |
Consumer Staples | | | 47,261,406 | | | | 10.9 | |
Producer Durables | | | 44,607,308 | | | | 10.3 | |
Financial Services | | | 35,040,655 | | | | 8.1 | |
Energy | | | 12,562,808 | | | | 2.9 | |
Materials & Processing | | | 6,299,863 | | | | 1.5 | |
Short-Term Investments | | | 36,183,440 | | | | 8.4 | |
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Total Investments | | $ | 432,235,618 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments and may vary over time. |
Please note: The sector breakdown is classified in the above chart and throughout this report according to the Russell sector classification scheme. The Russell Sector scheme was developed by Russell Investments. Russell classifies index members into industries that most closely describe the nature of its business and its primary economic orientation. Multiple resources are used to obtain overall information about the company. Additional Russell sector scheme information can be found within Russell Index methodology documents available on Russell.com. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
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LARGE CAP GROWTH PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
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Company | | Shares | | | U.S. $ Value | |
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COMMON STOCKS–92.7% | | | | | | | | |
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TECHNOLOGY–21.5% | | | | | | | | |
COMPUTER SERVICES, SOFTWARE & SYSTEMS–11.8% | | | | | | | | |
ANSYS, Inc.(a) | | | 92,692 | | | $ | 7,600,744 | |
Aspen Technology, Inc.(a) | | | 73,341 | | | | 2,568,402 | |
F5 Networks, Inc.(a) | | | 25,860 | | | | 3,373,825 | |
Facebook, Inc.–Class A(a) | | | 146,909 | | | | 11,461,840 | |
Google, Inc.–Class A(a) | | | 14,750 | | | | 7,827,235 | |
Google, Inc.–Class C(a) | | | 15,005 | | | | 7,898,632 | |
LinkedIn Corp.–Class A(a) | | | 13,850 | | | | 3,181,483 | |
NetSuite, Inc.(a) | | | 28,429 | | | | 3,103,594 | |
ServiceNow, Inc.(a) | | | 47,320 | | | | 3,210,662 | |
| | | | | | | | |
| | | | | | | 50,226,417 | |
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COMPUTER TECHNOLOGY–5.9% | | | | | | | | |
Apple, Inc. | | | 226,994 | | | | 25,055,598 | |
| | | | | | | | |
ELECTRONIC COMPONENTS–1.2% | | | | | | | | |
Amphenol Corp.–Class A | | | 97,254 | | | | 5,233,238 | |
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SEMICONDUCTORS & COMPONENT–2.6% | | | | | | | | |
Altera Corp. | | | 103,750 | | | | 3,832,525 | |
Linear Technology Corp. | | | 76,386 | | | | 3,483,202 | |
NXP Semiconductors NV(a) | | | 50,173 | | | | 3,833,217 | |
| | | | | | | | |
| | | | | | | 11,148,944 | |
| | | | | | | | |
| | | | | | | 91,664,197 | |
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CONSUMER DISCRETIONARY–20.0% | | | | | | | | |
AUTO PARTS–0.3% | | | | | | | | |
Mobileye NV(a) | | | 36,820 | | | | 1,493,419 | |
| | | | | | | | |
CABLE TELEVISION SERVICES–2.9% | | | | | | | | |
Comcast Corp.–Class A | | | 211,800 | | | | 12,286,518 | |
| | | | | | | | |
COSMETICS–0.6% | | | | | | | | |
Estee Lauder Cos., Inc. (The)–Class A | | | 33,490 | | | | 2,551,938 | |
| | | | | | | | |
DIVERSIFIED RETAIL–1.7% | | | | | | | | |
Costco Wholesale Corp. | | | 51,310 | | | | 7,273,192 | |
| | | | | | | | |
ENTERTAINMENT–1.8% | | | | | | | | |
Walt Disney Co. (The) | | | 80,640 | | | | 7,595,482 | |
| | | | | | | | |
LEISURE TIME–2.7% | | | | | | | | |
Priceline Group, Inc. (The)(a) | | | 10,120 | | | | 11,538,925 | |
| | | | | | | | |
RECREATIONAL VEHICLES & BOATS–1.4% | | | | | | | | |
Polaris Industries, Inc. | | | 40,120 | | | | 6,067,749 | |
| | | | | | | | |
RESTAURANTS–2.4% | | | | | | | | |
Starbucks Corp. | | | 122,395 | | | | 10,042,510 | |
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SPECIALTY RETAIL–4.3% | | | | | | | | |
Home Depot, Inc. (The) | | | 105,410 | | | | 11,064,888 | |
O’Reilly Automotive, Inc.(a) | | | 17,390 | | | | 3,349,662 | |
| | | | | | | | |
Ulta Salon Cosmetics & Fragrance, Inc.(a) | | | 31,980 | | | $ | 4,088,323 | |
| | | | | | | | |
| | | | | | | 18,502,873 | |
| | | | | | | | |
TEXTILES, APPAREL & SHOES–1.9% | | | | | | | | |
NIKE, Inc.–Class B | | | 86,190 | | | | 8,287,168 | |
| | | | | | | | |
| | | | | | | 85,639,774 | |
| | | | | | | | |
HEALTH CARE–17.1% | | | | | | | | |
BIOTECHNOLOGY–2.7% | | | | | | | | |
Biogen Idec, Inc.(a) | | | 33,745 | | | | 11,454,740 | |
| | | | | | | | |
HEALTH CARE MANAGEMENT SERVICES–2.8% | | | | | | | | |
UnitedHealth Group, Inc. | | | 119,521 | | | | 12,082,378 | |
| | | | | | | | |
HEALTH CARE SERVICES–1.5% | | | | | | | | |
McKesson Corp. | | | 17,290 | | | | 3,589,058 | |
Premier, Inc.–Class A(a) | | | 80,246 | | | | 2,690,649 | |
| | | | | | | | |
| | | | | | | 6,279,707 | |
| | | | | | | | |
HEALTH CARE: MISC–1.2% | | | | | | | | |
Quintiles Transnational Holdings, Inc.(a) | | | 87,838 | | | | 5,171,023 | |
| | | | | | | | |
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES–0.6% | | | | | | | | |
Align Technology, Inc.(a) | | | 43,214 | | | | 2,416,095 | |
| | | | | | | | |
MEDICAL EQUIPMENT–2.0% | | | | | | | | |
Illumina, Inc.(a) | | | 3,305 | | | | 610,037 | |
Intuitive Surgical, Inc.(a) | | | 15,410 | | | | 8,150,965 | |
| | | | | | | | |
| | | | | | | 8,761,002 | |
| | | | | | | | |
PHARMACEUTICALS–6.3% | | | | | | | | |
Allergan, Inc./United States | | | 71,026 | | | | 15,099,417 | |
Gilead Sciences, Inc.(a) | | | 124,250 | | | | 11,711,805 | |
| | | | | | | | |
| | | | | | | 26,811,222 | |
| | | | | | | | |
| | | | | | | 72,976,167 | |
| | | | | | | | |
CONSUMER STAPLES–11.1% | | | | | | | | |
BEVERAGE: SOFT DRINKS–3.5% | | | | | | | | |
Keurig Green Mountain, Inc. | | | 17,840 | | | | 2,361,927 | |
Monster Beverage Corp.(a) | | | 115,926 | | | | 12,560,582 | |
| | | | | | | | |
| | | | | | | 14,922,509 | |
| | | | | | | | |
DRUG & GROCERY STORE CHAINS–3.6% | | | | | | | | |
CVS Health Corp. | | | 160,314 | | | | 15,439,841 | |
| | | | | | | | |
FOODS–1.3% | | | | | | | | |
Mead Johnson Nutrition Co.–Class A | | | 53,660 | | | | 5,394,976 | |
| | | | | | | | |
TOBACCO–2.7% | | | | | | | | |
Philip Morris International, Inc. | | | 141,241 | | | | 11,504,080 | |
| | | | | | | | |
| | | | | | | 47,261,406 | |
| | | | | | | | |
6
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
PRODUCER DURABLES–10.4% | | | | | | | | |
AEROSPACE–1.7% | | | | | | | | |
Boeing Co. (The) | | | 44,740 | | | $ | 5,815,305 | |
Rockwell Collins, Inc. | | | 17,034 | | | | 1,439,033 | |
| | | | | | | | |
| | | | | | | 7,254,338 | |
| | | | | | | | |
DIVERSIFIED MANUFACTURING OPERATIONS–2.7% | | | | | | | | |
Danaher Corp. | | | 133,642 | | | | 11,454,456 | |
| | | | | | | | |
RAILROAD EQUIPMENT–1.6% | | | | | | | | |
Wabtec Corp./DE | | | 77,560 | | | | 6,739,188 | |
| | | | | | | | |
SCIENTIFIC INSTRUMENTS: CONTROL & FILTER–1.6% | | | | | | | | |
Pall Corp. | | | 68,940 | | | | 6,977,417 | |
| | | | | | | | |
SCIENTIFIC INSTRUMENTS: ELECTRICAL–1.4% | | | | | | | | |
AMETEK, Inc. | | | 113,181 | | | | 5,956,716 | |
| | | | | | | | |
SCIENTIFIC INSTRUMENTS: GAUGES & METERS–0.9% | | | | | | | | |
Mettler-Toledo International, Inc.(a) | | | 12,985 | | | | 3,927,443 | |
| | | | | | | | |
TRUCKERS–0.5% | | | | | | | | |
JB Hunt Transport Services, Inc. | | | 27,273 | | | | 2,297,750 | |
| | | | | | | | |
| | | | | | | 44,607,308 | |
| | | | | | | | |
FINANCIAL SERVICES–8.2% | | | | | | | | |
ASSET MANAGEMENT & CUSTODIAN–2.9% | | | | | | | | |
Affiliated Managers Group, Inc.(a) | | | 27,731 | | | | 5,885,628 | |
BlackRock, Inc.–Class A | | | 17,900 | | | | 6,400,324 | |
| | | | | | | | |
| | | | | | | 12,285,952 | |
| | | | | | | | |
FINANCIAL DATA & SYSTEMS–3.8% | | | | | | | | |
Visa, Inc.–Class A | | | 61,450 | | | | 16,112,190 | |
| | | | | | | | |
SECURITIES BROKERAGE & SERVICES–1.5% | | | | | | | | |
Intercontinental Exchange, Inc. | | | 30,291 | | | | 6,642,513 | |
| | | | | | | | |
| | | | | | | 35,040,655 | |
| | | | | | | | |
ENERGY–2.9% | | | | | | | | |
OIL WELL EQUIPMENT & SERVICES–2.9% | | | | | | | | |
FMC Technologies, Inc.(a) | | | 110,780 | | | | 5,188,935 | |
Schlumberger Ltd. | | | 86,335 | | | | 7,373,873 | |
| | | | | | | | |
| | | | | | | 12,562,808 | |
| | | | | | | | |
MATERIALS & PROCESSING–1.5% | | | | | | | | |
FERTILIZERS–0.7% | | | | | | | | |
Monsanto Co. | | | 25,073 | | | | 2,995,471 | |
| | | | | | | | |
| | | | | | | | |
METAL FABRICATING–0.8% | | | | | | | | |
Precision Castparts Corp. | | | 13,718 | | | $ | 3,304,392 | |
| | | | | | | | |
| | | | | | | 6,299,863 | |
| | | | | | | | |
Total Common Stocks (cost $296,418,930) | | | | | | | 396,052,178 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–8.5% | | | | | | | | |
TIME DEPOSIT–8.5% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (Cost $36,183,440) | | $ | 36,183 | | | | 36,183,440 | |
| | | | | | | | |
TOTAL INVESTMENTS–101.2% (cost $332,602,370) | | | | | | | 432,235,618 | |
Other assets less liabilities–(1.2)% | | | | | | | (5,163,868 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 427,071,750 | |
| | | | | | | | |
(a) | | Non-income producing security. |
See notes to financial statements.
7
| | |
LARGE CAP GROWTH PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Unaffiliated issuers (cost $332,602,370) | | $ | 432,235,618 | |
Dividends and interest receivable | | | 347,104 | |
Receivable for capital stock sold | | | 95,222 | |
| | | | |
Total assets | | | 432,677,944 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased | | | 4,831,485 | |
Payable for capital stock redeemed | | | 329,845 | |
Advisory fee payable | | | 272,608 | |
Distribution fee payable | | | 50,663 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 109,171 | |
| | | | |
Total liabilities | | | 5,606,194 | |
| | | | |
NET ASSETS | | $ | 427,071,750 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 8,894 | |
Additional paid-in capital | | | 287,573,060 | |
Accumulated net realized gain on investment transactions | | | 39,856,548 | |
Net unrealized appreciation on investments | | | 99,633,248 | |
| | | | |
| | $ | 427,071,750 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 189,619,754 | | | | 3,883,331 | | | $ | 48.83 | |
B | | $ | 237,451,996 | | | | 5,011,155 | | | $ | 47.38 | |
See notes to financial statements.
8
| | |
LARGE CAP GROWTH PORTFOLIO |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers | | $ | 3,582,737 | |
Affiliated issuers | | | 577 | |
Interest | | | 2,730 | |
Securities lending income | | | 6,831 | |
| | | | |
| | | 3,592,875 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 3,096,216 | |
Distribution fee—Class B | | | 571,201 | |
Transfer agency—Class A | | | 4,884 | |
Transfer agency—Class B | | | 6,040 | |
Custodian | | | 116,519 | |
Printing | | | 60,565 | |
Administrative | | | 48,204 | |
Legal | | | 42,638 | |
Audit and tax | | | 41,087 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 15,799 | |
| | | | |
Total expenses | | | 4,007,656 | |
| | | | |
Net investment loss | | | (414,781 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 69,922,926 | |
Net change in unrealized appreciation/depreciation of investments | | | (15,610,530 | ) |
| | | | |
Net gain on investment transactions | | | 54,312,396 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 53,897,615 | |
| | | | |
See notes to financial statements.
9
| | |
| | |
LARGE CAP GROWTH PORTFOLIO |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment loss | | $ | (414,781 | ) | | $ | (951,019 | ) |
Net realized gain on investment transactions | | | 69,922,926 | | | | 40,515,361 | |
Net change in unrealized appreciation/depreciation of investments | | | (15,610,530 | ) | | | 81,506,094 | |
| | | | | | | | |
Net increase in net assets from operations | | | 53,897,615 | | | | 121,070,436 | |
DIVIDENDS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | –0 | – | | | (127,070 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (47,664,357 | ) | | | (51,226,644 | ) |
| | | | | | | | |
Total increase | | | 6,233,258 | | | | 69,716,722 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 420,838,492 | | | | 351,121,770 | |
| | | | | | | | |
End of period (including accumulated net investment loss of ($0) and distributions in excess of net investment income of $0, respectively) | | $ | 427,071,750 | | | $ | 420,838,492 | |
| | | | | | | | |
See notes to financial statements.
10
| | |
LARGE CAP GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Large Cap Growth Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement
11
| | |
LARGE CAP GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 396,052,178 | | | $ | –0 | – | | $ | –0 | – | | $ | 396,052,178 | |
Short-Term Investments | | | –0 | – | | | 36,183,440 | | | | –0 | – | | | 36,183,440 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 396,052,178 | | | | 36,183,440 | | | | –0 | – | | | 432,235,618 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 396,052,178 | | | $ | 36,183,440 | | | $ | –0 | – | | $ | 432,235,618 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
12
| | |
| | AllianceBernstein Variable Products Series Fund |
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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.
13
| | |
LARGE CAP GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE B: Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,204.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $214,811, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 252,671,350 | | | $ | 303,368,104 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 333,000,781 | |
| | | | |
Gross unrealized appreciation | | | 101,714,951 | |
Gross unrealized depreciation | | | (2,480,114 | ) |
| | | | |
Net unrealized appreciation | | $ | 99,234,837 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
14
| | |
| | AllianceBernstein Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. As of December 31, 2014, the Portfolio had no securities out on loan. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $6,831 and $577 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 3,737 | | | $ | 19,163 | | | $ | 22,900 | | | $ | 0 | |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 111,041 | | | | 99,625 | | | | | $ | 5,139,702 | | | $ | 3,596,763 | |
Shares issued in reinvestment of dividends | | | –0 | – | | | 3,499 | | | | | | –0 | – | | | 127,070 | |
Shares redeemed | | | (680,255 | ) | | | (791,125 | ) | | | | | (30,222,644 | ) | | | (28,666,154 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (569,214 | ) | | | (688,001 | ) | | | | $ | (25,082,942 | ) | | $ | (24,942,321 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 414,540 | | | | 257,016 | | | | | $ | 18,012,375 | | | $ | 9,095,751 | |
Shares redeemed | | | (937,930 | ) | | | (1,007,058 | ) | | | | | (40,593,790 | ) | | | (35,380,074 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (523,390 | ) | | | (750,042 | ) | | | | $ | (22,581,415 | ) | | $ | (26,284,323 | ) |
| | | | | | | | | | | | | | | | | | |
15
| | |
LARGE CAP GROWTH PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Focused Portfolio Risk—Investments in a limited number of companies may have more risk because changes in the value of a single security may have a more significant effect, either negative or positive, on the Portfolio’s NAV.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | –0 | – | | $ | 127,070 | |
| | | | | | | | |
Total taxable distributions paid | | $ | –0 | – | | $ | 127,070 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed capital gains | | $ | 40,254,959 | |
Accumulated capital and other losses | | | –0 | –(a) |
Unrealized appreciation/(depreciation) | | | 99,234,837 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 139,489,796 | |
| | | | |
(a) | | During the fiscal year ended December 31, 2014, the Portfolio utilized $29,472,855 of capital loss carryforwards to offset current year net realized gains. |
(b) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to the tax treatment of partnership investments and the disallowance of a net operating loss resulted in a net decrease in accumulated net investment loss, a net decrease in accumulated net realized gain on investment transactions, and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
17
| | |
| | |
LARGE CAP GROWTH PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $42.78 | | | | $31.17 | | | | $26.86 | | | | $27.79 | | | | $25.36 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a) | | | .02 | | | | (.04 | ) | | | .05 | | | | .09 | | | | .07 | |
Net realized and unrealized gain (loss) on investment transactions | | | 6.03 | | | | 11.68 | | | | 4.35 | | | | (.93 | ) | | | 2.48 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 6.05 | | | | 11.64 | | | | 4.40 | | | | (.84 | ) | | | 2.55 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | (.03 | ) | | | (.09 | ) | | | (.09 | ) | | | (.12 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $48.83 | | | | $42.78 | | | | $31.17 | | | | $26.86 | | | | $27.79 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b)* | | | 14.14 | % | | | 37.35 | % | | | 16.39 | % | | | (3.04 | )% | | | 10.10 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $189,620 | | | | $190,488 | | | | $160,226 | | | | $166,654 | | | | $200,977 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .83 | % | | | .85 | % | | | .86 | % | | | .84 | % | | | .85 | %+ |
Net investment income (loss) | | | .04 | % | | | (.11 | )% | | | .18 | % | | | .33 | % | | | .29 | %+ |
Portfolio turnover rate | | | 65 | % | | | 60 | % | | | 94 | % | | | 89 | % | | | 105 | % |
See footnote summary on page 19.
18
| | |
| | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $41.62 | | | | $30.38 | | | | $26.17 | | | | $27.08 | | | | $24.72 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a) | | | (.09 | ) | | | (.13 | ) | | | (.02 | ) | | | .02 | | | | .01 | |
Net realized and unrealized gain (loss) on investment transactions | | | 5.85 | | | | 11.37 | | | | 4.24 | | | | (.91 | ) | | | 2.42 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 5.76 | | | | 11.24 | | | | 4.22 | | | | (.89 | ) | | | 2.43 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | –0 | – | | | –0 | – | | | (.01 | ) | | | (.02 | ) | | | (.07 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $47.38 | | | | $41.62 | | | | $30.38 | | | | $26.17 | | | | $27.08 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b)* | | | 13.84 | % | | | 37.00 | % | | | 16.12 | % | | | (3.27 | )% | | | 9.83 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $237,452 | | | | $230,350 | | | | $190,896 | | | | $194,729 | | | | $223,520 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.08 | % | | | 1.10 | % | | | 1.11 | % | | | 1.09 | % | | | 1.10 | %+ |
Net investment income (loss) | | | (.21 | )% | | | (.36 | )% | | | (.07 | )% | | | .08 | % | | | .04 | %+ |
Portfolio turnover rate | | | 65 | % | | | 60 | % | | | 94 | % | | | 89 | % | | | 105 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2013, December 31, 2012, December 31, 2011 and December 31, 2010 by 0.02%, 0.10%, 0.95%, 0.46% and 0.58%, respectively. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
19
| | |
| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Large Cap Growth Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Large Cap Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Large Cap Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
20
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| | |
| | |
LARGE CAP GROWTH PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) |
| Earl D. Weiner(1) |
| |
| |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Frank V. Caruso(2), Vice President Vincent C. DuPont(2) , Vice President John H. Fogarty(2), Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
| | |
CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the U.S. Large Cap Growth Investment Team. Mr. Frank V. Caruso, Mr. Vincent C. DuPont and Mr. John H. Fogarty are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
21
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LARGE CAP GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas
New York, NY 10105
54
(2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73
(2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014 |
| | | | | | | | |
John H. Dobkin, ##
73
(1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989–May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
| | | | | | | | |
22
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ##
71
(2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ##
82
(1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ##
78
(2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
23
| | |
LARGE CAP GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Nancy P. Jacklin, ##
66
(2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
| | | | | | | | |
Garry L. Moody, ##
62
(2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
24
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner, ##
75
(2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in Section 2(a)(19) of the Investment Company Act of 1940, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
25
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LARGE CAP GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Frank V. Caruso
58 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Vincent C. DuPont
52 | | Vice President | | Senior Vice President of the Adviser**, with which he was associated since prior to 2010. |
| | | | |
John H. Fogarty 45 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
| | | | |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
26
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LARGE CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Large Cap Growth Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($MIL) |
Large Cap Growth Portfolio | | Growth | | 0.75% on first $2.5 billion | | $407.2 |
| | | 0.65% on next $2.5 billion | | |
| | | 0.60% on the balance | | |
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
27
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LARGE CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $54,101 (0.014% of the Portfolio’s average daily net assets) for such services.
Set forth below are the Portfolio’s gross expense ratios for the most recently completed fiscal year:
| | | | |
Portfolio | | Total Expense Ratio | | Fiscal Year |
Large Cap Growth Portfolio | | C lass A 0.85% | | December 31 |
| | Class B 1.10% | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
28
| | |
| | AllianceBernstein Variable Products Series Fund |
fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($MIL) | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Large Cap Growth Portfolio | | $407.2 | | Large Cap Growth Schedule 0.80% on first $25m | | | 0.330 | % | | | 0.750 | % |
| | | | 0.50% on the next $25m | | | | | | | | |
| | | | 0.40% on the next $50m | | | | | | | | |
| | | | 0.30% on the next $100m | | | | | | | | |
| | | | 0.25% on the balance | | | | | | | | |
| | | | Minimum account size $25m | | | | | | | | |
The Adviser also manages AllianceBernstein Large Cap Growth Fund, Inc. (“Large Cap Growth Fund, Inc.), retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Large Cap Growth Fund, Inc. and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Large Cap Growth Portfolio | | Large Cap Growth Fund, Inc. | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750 | % | | | 0.750 | % |
The Adviser also manages and sponsors retail mutual funds, which are organized in jurisdictions outside the United States, generally Luxembourg and Japan, and sold to non-United States resident investors. The Adviser charges the fees set forth for American Growth Portfolio, a Luxembourg fund that has a somewhat similar investment style as the Portfolio.
| | | | |
Fund | | Fee7 | |
American Growth Portfolio | | | | |
Class A | | | 1.50 | % |
Class I (Institutional) | | | 0.70 | % |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families. The Adviser charges the fees set forth below for the sub-advisory relationship that has a somewhat similar investment style as the Portfolio. Also shown are the Portfolio’s advisory fee and what would have been the effective advisory fee of the Portfolio had the fee schedules of the sub-advisory relationship been applicable to the Portfolio based on March 31, 2014 net assets.
| | | | | | | | | | | | |
Portfolio | | | | Fee Schedule | | Effective Sub-Adv. Fee (%) | | | Portfolio Advisory Fee (%) | |
Large Cap Growth Portfolio | | Client #1 | | 0.35% on the first $50 million | | | 0.275 | | | | 0.750 | |
| | | 0.30% on the next $100 million 0.25% on the balance | | | | | | | | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser.
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | Class A shares of the fund are charged an “all-in” fee, which includes investment advisory services and distribution related services, unlike Class I shares, whose fee is for only investment advisory services. |
29
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LARGE CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
While it appears that the sub-advisory relationship is paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such a lower fee due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationship. There could be various business reasons why an investment adviser would be willing to provide a sub-advisory relationship investment related services at a different fee level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management, generally required by a registered investment company.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.8 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.9,10
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | |
Portfolio | | Contractual Management Fee (%)11 | | Lipper EG Median (%) | | Lipper EG Rank | |
Large Cap Growth Portfolio | | 0.750 | | 0.747 | | | 8/13 | |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.12
| | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)13 | | Lipper EG Median (%) | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Large Cap Growth Portfolio | | 0.847 | | 0.797 | | | 11/13 | | | | 0.789 | | | | 46/66 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
8 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
9 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
10 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
11 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
12 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
13 | | Most recently completed fiscal year end Class A total expense ratio. |
30
| | |
| | AllianceBernstein Variable Products Series Fund |
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio decreased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI, an affiliate of the Adviser, received $517,869 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $1,194,047 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.14
The Portfolio did not effect brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) nor its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and pay commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted in the future with the Portfolio would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market
14 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
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LARGE CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.15,16 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.17 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio18 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)19 for the periods ended February 28, 2014.20
| | | | | | | | | | | | | | | | |
| | Portfolio (%) | | PG Median (%) | | PU Median (%) | | | PG Rank | | | PU Rank | |
Large Cap Growth Portfolio | | | | | | | | | | | | | | | | |
1 year | | 31.67 | | 31.67 | | | 32.77 | | | | 7/13 | | | | 52/89 | |
3 year | | 13.79 | | 13.94 | | | 14.66 | | | | 8/13 | | | | 56/82 | |
5 year | | 21.94 | | 22.11 | | | 22.98 | | | | 9/13 | | | | 55/77 | |
10 year | | 7.26 | | 7.38 | | | 7.69 | | | | 8/12 | | | | 42/64 | |
15 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
16 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
17 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
18 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
19 | | The Portfolio’s PG is identical to the Portfolio’s respective EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
20 | | Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
32
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| | AllianceBernstein Variable Products Series Fund |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)21 versus its benchmarks.22 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.23
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year | | | 3 Year | | | 5 Year | | | 10 Year | | | Since Inception | | | Annualized | | | Risk Period | |
| | | | | | | Volatility | | | Sharpe | | |
| | (%) | | | (%) | | | (%) | | | (%) | | | (%) | | | (%) | | | (%) | | | (Year) | |
Large Cap Growth Portfolio | | | 31.67 | | | | 13.79 | | | | 21.94 | | | | 7.26 | | | | 9.41 | | | | 16.47 | | | | 0.41 | | | | 10 | |
Russell 1000 Growth Index | | | 29.14 | | | | 15.06 | | | | 24.02 | | | | 7.77 | | | | 8.67 | | | | 15.03 | | | | 0.46 | | | | 10 | |
Inception Date: June 26, 1992 | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
21 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
22 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
23 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
33
VPS-LCG-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | REAL ESTATE INVESTMENT PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
REAL ESTATE INVESTMENT | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Real Estate Investment Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is total return from long-term growth of capital and income. Under normal circumstances, the Portfolio invests at least 80% of its net assets in the equity securities of real estate investment trusts (“REITs”), and other real estate industry companies, such as real estate operating companies (“REOCs”). The Portfolio seeks to invest in real estate companies whose underlying portfolios are diversified geographically and by property type.
The Portfolio may invest in mortgage-backed securities, which are securities that directly or indirectly represent participations in, or are collateralized by and payable from, mortgage loans secured by real property. These securities include mortgage pass-through certificates, real estate mortgage investment conduit certificates (“REMICs”), and collateralized mortgage obligations, (“CMOs”). The Portfolio may also invest in short-term investment grade debt securities and other fixed-income securities.
The Portfolio invests in equity securities that include common stock, shares of beneficial interests of REITs and securities with common stock characteristics, such as preferred stock or convertible securities (“real estate equity securities”). The Portfolio may invest in foreign securities and enter into forward commitments and standby commitment agreements.
Currencies can have a dramatic impact on equity returns, significantly adding to returns in some years and greatly diminishing them in others. Currency and equity positions are evaluated separately. AllianceBernstein L.P. (the “Adviser”) may seek to hedge the currency exposure resulting from securities positions when it finds the currency exposure unattractive. To hedge all or a portion of its currency risk, the Portfolio may, from time to time, invest in currency-related derivatives, including forward currency exchange contracts, futures, options on futures, swaps and options. The Adviser may also seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives.
The Portfolio may enter into other derivatives transactions, such as options, futures, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds (“ETFs”). These transactions may be used, for example, to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Portfolio’s portfolio from a decline in value, sometimes within certain ranges.
The Portfolio may, at times, invest in shares of ETFs in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
INVESTMENT RESULTS
The table on page 4 shows the Portfolio’s performance compared to its benchmark, the Financial Times Stock Exchange National Association of Real Estate Investment Trusts (“FTSE NAREIT”) Equity REIT Index, in addition to the broad market as measured by the Standard & Poor’s (“S&P”) 500 Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio underperformed the benchmark for the annual period. Sector selection was positive, helped primarily by an overweight to the lodging sector, partially offset by an underweight to the residential sector. Stock selection was negative, detracting in the residential and diversified sectors, which was partially offset by positive stock selection in the retail sector.
The Portfolio did not utilize derivatives during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Falling interest rates and modest economic growth helped the U.S. real estate market post strong gains during the 12-month period ended December 31, 2014. The FTSE NAREIT Equity REIT Index finished the 12-month period up 28.03%; the S&P 500 Index also benefited from these trends and rose 13.69% during the same period. In the U.S., most segments of the property market have performed well. For example, industry data and lodging company reported earnings suggest that business in the lodging industry is the best in many years, in the view of the Portfolio’s Investment Management Team (the “Team”). In the office sector, conditions have improved in urban central business districts and select suburban markets such as the Southeast region. Improvement in the labor market has helped support demand for office space. In the retail sector, the demand for prime shopping malls seen in recent years spread to secondary markets.
The Team continues to find attractive opportunities across a wide group of sectors, focusing on attractively priced companies with improving fundamentals, together with the balance sheet strength to withstand periods of renewed volatility.
1
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| | |
REAL ESTATE INVESTMENT PORTFOLIO |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged FTSE® NAREIT Equity REIT Index and the unmanaged S&P® 500 Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The FTSE NAREIT Equity REIT Index (market-value-weighted index based upon the last closing price of the month) represents the performance of tax-qualified REITs listed on the NYSE, AMEX and the NASDAQ. The S&P 500 Index includes 500 U.S. stocks and is a common representation of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market.
Interest Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of investments in fixed-income securities tends to fall and this decrease in value may not be offset by higher income from new investments. Interest rate risk is generally greater for fixed-income securities with longer maturities or durations.
Credit Risk: An issuer or guarantor of a fixed-income security, or the counterparty to a derivatives or other contract, may be unable or unwilling to make timely payments of interest or principal, or to otherwise honor its obligations. The issuer or guarantor may default, causing a loss of the full principal amount of a security. The degree of risk for a particular security may be reflected in its credit rating. There is the possibility that the credit rating of a fixed-income security may be downgraded after purchase, which may adversely affect the value of the security. Investments in fixed-income securities with lower ratings tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
Real Estate Risk: The Portfolio’s investments in the real estate market have many of the same risks as direct ownership of real estate, including the risk that the value of real estate could decline due to a variety of factors that affect the real estate market generally. Investments in REITs may have additional risks. REITs are dependent on the capability of their managers, may have limited diversification, and could be significantly affected by changes in tax laws.
Prepayment Risk: The value of mortgage-related or other asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early payments of principal on some of these securities may occur during periods of falling mortgage interest rates and expose the Portfolio to a lower rate of return upon reinvestment of principal. Early payments associated with these securities cause these securities to experience significantly greater price and yield volatility than is experienced by traditional fixed-income securities. During periods of rising interest rates, a reduction in prepayments may increase the effective life of mortgage-related securities, subjecting them to greater risk of decline in market value in response to rising interest rates. If the life of a mortgage-related security is inaccurately predicted, the Portfolio may not be able to realize the rate of return it expected.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Leverage Risk: To the extent the Portfolio uses leveraging techniques, its net asset value (“NAV”), may be more volatile because leverage tends to exaggerate the effect of changes in interest rates and any increase or decrease in the value of the Portfolio’s investments.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
(Disclosures, Risks and Note about Historical Performance continued on next page)
2
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REAL ESTATE INVESTMENT PORTFOLIO |
DISCLOSURESAND RISKS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Management Risk: The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
3
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| | |
REAL ESTATE INVESTMENT PORTFOLIO |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | NAV Returns | |
| 1 Year | | | 5 Years* | | �� | 10 Years* | |
Real Estate Investment Portfolio Class A | | | 25.35% | | | | 16.87% | | | | 8.89% | |
Real Estate Investment Portfolio Class B | | | 24.96% | | | | 16.56% | | | | 8.62% | |
FTSE NAREIT Equity REIT Index | | | 28.03% | | | | 16.91% | | | | 8.32% | |
S&P 500 Index | | | 13.69% | | | | 15.45% | | | | 7.67% | |
* Average annual returns. | |
Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.86% and 1.15% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
REAL ESTATE INVESTMENT PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Real Estate Investment Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the FTSE NAREIT Equity REIT Index and the broad market, as measured by the S&P 500 Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on pages 2-3.
4
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| | |
REAL ESTATE INVESTMENT PORTFOLIO |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each classes’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,094.80 | | | $ | 5.81 | | | | 1.10 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.66 | | | $ | 5.60 | | | | 1.10 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,092.70 | | | $ | 7.12 | | | | 1.35 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.40 | | | $ | 6.87 | | | | 1.35 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
5
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REAL ESTATE INVESTMENT PORTFOLIO |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Simon Property Group, Inc. | | $ | 2,873,696 | | | | 5.6 | % |
American Tower Corp. | | | 1,613,232 | | | | 3.2 | |
Macerich Co. (The) | | | 1,552,260 | | | | 3.0 | |
HCP, Inc. | | | 1,421,729 | | | | 2.8 | |
Ventas, Inc. | | | 1,391,697 | | | | 2.7 | |
Equity Residential | | | 1,301,741 | | | | 2.5 | |
Washington Prime Group, Inc. | | | 1,261,968 | | | | 2.5 | |
LTC Properties, Inc. | | | 1,139,256 | | | | 2.2 | |
AvalonBay Communities, Inc. | | | 1,117,588 | | | | 2.2 | |
Associated Estates Realty Corp. | | | 1,094,305 | | | | 2.1 | |
| | | | | | | | |
| | $ | 14,767,472 | | | | 28.8 | % |
INDUSTRY BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
INDUSTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Diversified/Specialty | | $ | 10,371,743 | | | | 20.1 | % |
Regional Mall | | | 7,785,584 | | | | 15.1 | |
Multi-Family | | | 7,258,716 | | | | 14.1 | |
Health Care | | | 6,011,754 | | | | 11.7 | |
Lodging | | | 5,687,459 | | | | 11.1 | |
Shopping Center/Other Retail | | | 4,551,869 | | | | 8.8 | |
Office | | | 3,681,804 | | | | 7.2 | |
Industrial Warehouse Distribution | | | 2,317,740 | | | | 4.5 | |
Self Storage | | | 1,754,160 | | | | 3.4 | |
Single Family | | | 471,713 | | | | 0.9 | |
Financial:Other | | | 450,078 | | | | 0.9 | |
Triple Net | | | 228,791 | | | | 0.4 | |
Student Housing | | | 181,984 | | | | 0.4 | |
Short-Term Investments | | | 740,036 | | | | 1.4 | |
| | | | | | | | |
Total Investments | | $ | 51,493,431 | | | | 100.0 | % |
† | | The Portfolio’s industry breakdown is expressed as a percentage of total investments (excluding security lending) and may vary over time. |
Please note: The industry classifications presented herein are based on the industry categorization methodology of the Adviser.
6
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REAL ESTATE INVESTMENT PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.9% | | | | | | | | |
| | | | | | | | |
EQUITY: OTHER–32.4% | | | | | | | | |
DIVERSIFIED/SPECIALTY–20.2% | | | | | |
American Tower Corp. | | | 16,320 | | | $ | 1,613,232 | |
BioMed Realty Trust, Inc. | | | 15,250 | | | | 328,485 | |
CBRE Group, Inc.–Class A(a) | | | 15,420 | | | | 528,135 | |
Chambers Street Properties | | | 31,810 | | | | 256,389 | |
ClubCorp Holdings, Inc. | | | 28,054 | | | | 503,008 | |
Crown Castle International Corp. | | | 9,480 | | | | 746,076 | |
Digital Realty Trust, Inc. | | | 4,630 | | | | 306,969 | |
Duke Realty Corp. | | | 33,010 | | | | 666,802 | |
Gramercy Property Trust, Inc.(b) | | | 117,312 | | | | 809,453 | |
Home Depot, Inc. (The) | | | 1,860 | | | | 195,244 | |
Kennedy-Wilson Holdings, Inc. | | | 30,400 | | | | 769,120 | |
Lexington Realty Trust(b) | | | 68,860 | | | | 756,083 | |
Rayonier, Inc. | | | 9,310 | | | | 260,121 | |
Regal Entertainment Group–Class A | | | 35,490 | | | | 758,066 | |
Spirit Realty Capital, Inc. | | | 57,199 | | | | 680,096 | |
Vornado Realty Trust | | | 5,370 | | | | 632,103 | |
Weyerhaeuser Co. | | | 15,669 | | | | 562,361 | |
| | | | | | | | |
| | | | | | | 10,371,743 | |
| | | | | | | | |
HEALTH CARE–11.7% | | | | | | | | |
HCP, Inc. | | | 32,290 | | | | 1,421,729 | |
Health Care REIT, Inc. | | | 9,091 | | | | 687,916 | |
LTC Properties, Inc. | | | 26,390 | | | | 1,139,256 | |
Medical Properties Trust, Inc. | | | 70,125 | | | | 966,322 | |
Senior Housing Properties Trust | | | 18,310 | | | | 404,834 | |
Ventas, Inc. | | | 19,410 | | | | 1,391,697 | |
| | | | | | | | |
| | | | | | | 6,011,754 | |
| | | | | | | | |
TRIPLE NET–0.5% | | | | | | | | |
EPR Properties | | | 3,970 | | | | 228,791 | |
| | | | | | | | |
| | | | | | | 16,612,288 | |
| | | | | | | | |
RETAIL–24.0% | | | | | | | | |
REGIONAL MALL–15.2% | | | | | | | | |
General Growth Properties, Inc. | | | 33,490 | | | | 942,074 | |
Glimcher Realty Trust | | | 8,590 | | | | 118,026 | |
Macerich Co. (The) | | | 18,610 | | | | 1,552,260 | |
Pennsylvania Real Estate Investment Trust | | | 39,080 | | | | 916,817 | |
Simon Property Group, Inc. | | | 15,780 | | | | 2,873,696 | |
Taubman Centers, Inc. | | | 1,580 | | | | 120,743 | |
Washington Prime Group, Inc. | | | 73,285 | | | | 1,261,968 | |
| | | | | | | | |
| | | | | | | 7,785,584 | |
| | | | | | | | |
SHOPPING CENTER/OTHER RETAIL–8.8% | | | | | | | | |
DDR Corp. | | | 48,423 | | | | 889,046 | |
Federal Realty Investment Trust | | | 1,790 | | | | 238,893 | |
Kite Realty Group Trust | | | 14,506 | | | | 416,903 | |
Ramco-Gershenson Properties Trust | | | 47,481 | | | | 889,794 | |
Regency Centers Corp. | | | 6,300 | | | | 401,814 | |
Retail Opportunity Investments Corp. | | | 49,880 | | | | 837,485 | |
Retail Properties of America, Inc.–Class A | | | 14,000 | | | | 233,660 | |
| | | | | | | | |
Weingarten Realty Investors | | | 18,450 | | | $ | 644,274 | |
| | | | | | | | |
| | | | | | | 4,551,869 | |
| | | | | | | | |
| | | | | | | 12,337,453 | |
| | | | | | | | |
RESIDENTIAL–18.8% | | | | | | | | |
MULTI-FAMILY–14.1% | | | | | | | | |
Apartment Investment & Management Co.–Class A | | | 8,970 | | | | 333,236 | |
Associated Estates Realty Corp. | | | 47,148 | | | | 1,094,305 | |
AvalonBay Communities, Inc. | | | 6,840 | | | | 1,117,588 | |
Camden Property Trust | | | 2,010 | | | | 148,418 | |
Equity Residential | | | 18,120 | | | | 1,301,741 | |
Essex Property Trust, Inc. | | | 2,270 | | | | 468,982 | |
Meritage Homes Corp.(a) | | | 9,960 | | | | 358,460 | |
Mid-America Apartment Communities, Inc. | | | 13,230 | | | | 988,017 | |
PulteGroup, Inc. | | | 20,020 | | | | 429,629 | |
Sun Communities, Inc. | | | 13,205 | | | | 798,374 | |
TRI Pointe Homes, Inc.(a) | | | 14,424 | | | | 219,966 | |
| | | | | | | | |
| | | | | | | 7,258,716 | |
| | | | | | | | |
SELF STORAGE–3.4% | | | | | | | | |
CubeSmart | | | 21,380 | | | | 471,857 | |
Extra Space Storage, Inc. | | | 4,700 | | | | 275,608 | |
Public Storage | | | 4,290 | | | | 793,006 | |
Sovran Self Storage, Inc. | | | 2,450 | | | | 213,689 | |
| | | | | | | | |
| | | | | | | 1,754,160 | |
| | | | | | | | |
SINGLE FAMILY–0.9% | | | | | | | | |
Fortune Brands Home & Security, Inc. | | | 10,420 | | | | 471,713 | |
| | | | | | | | |
STUDENT HOUSING–0.4% | | | | | | | | |
American Campus Communities, Inc. | | | 4,400 | | | | 181,984 | |
| | | | | | | | |
| | | | | | | 9,666,573 | |
| | | | | | | | |
LODGING–11.1% | | | | | | | | |
LODGING–11.1% | | | | | | | | |
Ashford Hospitality Prime, Inc. | | | 45,792 | | | | 785,791 | |
Ashford Hospitality Trust, Inc. | | | 78,789 | | | | 825,709 | |
Ashford, Inc.(a) | | | 769 | | | | 72,286 | |
Chatham Lodging Trust | | | 26,120 | | | | 756,696 | |
Hersha Hospitality Trust | | | 113,797 | | | | 799,993 | |
Host Hotels & Resorts, Inc. | | | 8,890 | | | | 211,315 | |
Intrawest Resorts Holdings, Inc.(a) | | | 21,800 | | | | 260,292 | |
Pebblebrook Hotel Trust | | | 11,630 | | | | 530,677 | |
Starwood Hotels & Resorts Worldwide, Inc. | | | 7,840 | | | | 635,589 | |
Strategic Hotels & Resorts, Inc.(a) | | | 10,920 | | | | 144,471 | |
Wyndham Worldwide Corp. | | | 7,750 | | | | 664,640 | |
| | | | | | | | |
| | | | | | | 5,687,459 | |
| | | | | | | | |
OFFICE–7.2% | | | | | | | | |
OFFICE–7.2% | | | | | | | | |
Boston Properties, Inc. | | | 6,189 | | | | 796,462 | |
Columbia Property Trust, Inc. | | | 38,390 | | | | 973,187 | |
Corporate Office Properties Trust | | | 5,950 | | | | 168,802 | |
Cousins Properties, Inc. | | | 14,420 | | | | 164,676 | |
Government Properties Income Trust | | | 4,470 | | | | 102,855 | |
7
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REAL ESTATE INVESTMENT PORTFOLIO |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Hudson Pacific Properties, Inc. | | | 12,120 | | | $ | 364,327 | |
Kilroy Realty Corp. | | | 3,710 | | | | 256,250 | |
Parkway Properties, Inc./Md | | | 46,506 | | | | 855,245 | |
| | | | | | | | |
| | | | | | | 3,681,804 | |
| | | | | | | | |
INDUSTRIALS–4.5% | | | | | | | | |
INDUSTRIAL WAREHOUSE DISTRIBUTION–4.5% | | | | | | | | |
DCT Industrial Trust, Inc. | | | 11,440 | | | | 407,951 | |
Granite Real Estate Investment Trust | | | 22,380 | | | | 795,609 | |
ProLogis, Inc. | | | 11,972 | | | | 515,155 | |
STAG Industrial, Inc. | | | 24,450 | | | | 599,025 | |
| | | | | | | | |
| | | | | | | 2,317,740 | |
| | | | | | | | |
FINANCIAL: OTHER–0.9% | | | | | | | | |
FINANCIAL: OTHER–0.9% | | | | | | | | |
HFF, Inc.–Class A | | | 12,530 | | | | 450,078 | |
| | | | | | | | |
Total Common Stocks (cost $41,099,649) | | | | | | | 50,753,395 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–1.5% | | | | | | | | |
TIME DEPOSIT–1.5% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $740,036) | | $ | 740 | | | $ | 740,036 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–100.4% (cost $41,839,685) | | | | | | | 51,493,431 | |
| | | | | | | | |
| | Shares | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–2.3% | | | | | | | | |
INVESTMENT COMPANIES–2.3% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(c)(d) (cost $1,170,594) | | | 1,170,594 | | | | 1,170,594 | |
| | | | | | | | |
TOTAL INVESTMENTS–102.7% (cost $43,010,279) | | | | | | | 52,664,025 | |
Other assets less liabilities–(2.7)% | | | | | | | (1,359,846 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 51,304,179 | |
| | | | | | | | |
8
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
(d) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
Glossary:
REIT—Real Estate Investment Trust
See notes to financial statements.
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $41,839,685) | | $ | 51,493,431 | (a) |
Affiliated issuers (cost $1,170,594—investment of cash collateral for securities loaned) | | | 1,170,594 | |
Foreign currencies, at value (cost $8,930) | | | 8,750 | |
Dividends and interest receivable | | | 207,113 | |
Receivable for capital stock sold | | | 37,392 | |
| | | | |
Total assets | | | 52,917,280 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 1,170,594 | |
Payable for capital stock redeemed | | | 280,427 | |
Payable for investment securities purchased | | | 45,972 | |
Advisory fee payable | | | 23,967 | |
Administrative fee payable | | | 12,310 | |
Distribution fee payable | | | 2,838 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 76,881 | |
| | | | |
Total liabilities | | | 1,613,101 | |
| | | | |
NET ASSETS | | $ | 51,304,179 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 5,124 | |
Additional paid-in capital | | | 36,626,929 | |
Undistributed net investment income | | | 851,447 | |
Accumulated net realized gain on investment and foreign currency transactions | | | 4,167,112 | |
Net unrealized appreciation on investments and foreign currency denominated assets and liabilities | | | 9,653,567 | |
| | | | |
| | $ | 51,304,179 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 38,003,497 | | | | 3,801,306 | | | $ | 10.00 | |
B | | $ | 13,300,682 | | | | 1,322,872 | | | $ | 10.05 | |
(a) | | Includes securities on loan with a value of $1,116,504 (see Note E). |
See notes to financial statements.
9
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $6,604) | | $ | 1,122,303 | |
Affiliated issuers | | | 764 | |
Interest | | | 39 | |
Securities lending income | | | 9,368 | |
| | | | |
| | | 1,132,474 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 264,976 | |
Distribution fee—Class B | | | 32,008 | |
Transfer agency—Class A | | | 4,343 | |
Transfer agency—Class B | | | 1,569 | |
Custodian | | | 74,347 | |
Audit and tax | | | 53,035 | |
Administrative | | | 48,434 | |
Printing | | | 33,393 | |
Legal | | | 30,253 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 6,926 | |
| | | | |
Total expenses | | | 553,787 | |
| | | | |
Net investment income | | | 578,687 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 4,591,637 | |
Foreign currency transactions | | | (384 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | 5,670,894 | |
Foreign currency denominated assets and liabilities | | | (318 | ) |
| | | | |
Net gain on investment and foreign currency transactions | | | 10,261,829 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 10,840,516 | |
| | | | |
See notes to financial statements.
10
| | |
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
STATEMENT OF CHANGES IN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 578,687 | | | $ | 1,533,058 | |
Net realized gain on investment and foreign currency transactions | | | 4,591,253 | | | | 12,199,590 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 5,670,576 | | | | (9,677,724 | ) |
| | | | | | | | |
Net increase in net assets from operations | | | 10,840,516 | | | | 4,054,924 | |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (1,029,793 | ) | | | (1,092,258 | ) |
Class B | | | (330,126 | ) | | | (167,764 | ) |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (9,231,652 | ) | | | (7,572,992 | ) |
Class B | | | (3,268,192 | ) | | | (1,408,799 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase (decrease) | | | 10,353,385 | | | | (33,459,009 | ) |
| | | | | | | | |
Total increase (decrease) | | | 7,334,138 | | | | (39,645,898 | ) |
NET ASSETS | | | | | | | | |
Beginning of period | | | 43,970,041 | | | | 83,615,939 | |
| | | | | | | | |
End of period (including undistributed net investment income of $851,447 and $1,633,063, respectively) | | $ | 51,304,179 | | | $ | 43,970,041 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
NOTESTO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Real Estate Investment Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is total return from long-term growth of capital and income. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
12
| | |
| | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 50,753,395 | | | $ | –0 | – | | $ | –0 | – | | $ | 50,753,395 | |
Short-Term Investments | | | –0 | – | | | 740,036 | | | | –0 | – | | | 740,036 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 1,170,594 | | | | –0 | – | | | –0 | – | | | 1,170,594 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 51,923,989 | | | | 740,036 | | | | –0 | – | | | 52,664,025 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 51,923,989 | | | $ | 740,036 | | | $ | –0 | – | | $ | 52,664,025 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair
13
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
NOTESTO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
14
| | |
| | AllianceBernstein Variable Products Series Fund |
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,434.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $89,780, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 31,890,498 | | | $ | 34,188,325 | |
U.S. government securities | | | –0 | – | | | –0 | – |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation (excluding foreign currency transactions) are as follows:
| | | | |
Cost | | $ | 43,032,026 | |
| | | | |
Gross unrealized appreciation | | | 9,916,389 | |
Gross unrealized depreciation | | | (284,390 | ) |
| | | | |
Net unrealized appreciation | | $ | 9,631,999 | |
| | | | |
15
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
NOTESTO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $1,116,504 and had received cash collateral which has been invested into AB Exchange Reserves of $1,170,594. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $9,368 and $764 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 2,192 | | | $ | 23,699 | | | $ | 24,720 | | | $ | 1,171 | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 819,892 | | | | 524,528 | | | | | $ | 9,215,751 | | | $ | 6,706,724 | |
Shares issued in reinvestment of dividends and distributions | | | 1,109,346 | | | | 793,521 | | | | | | 10,261,445 | | | | 8,665,250 | |
Shares redeemed | | | (953,168 | ) | | | (4,211,856 | ) | | | | | (10,761,136 | ) | | | (48,665,290 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 976,070 | | | | (2,893,807 | ) | | | | $ | 8,716,060 | | | $ | (33,293,316 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 141,177 | | | | 173,655 | | | | | $ | 1,518,552 | | | $ | 2,176,681 | |
Shares issued in reinvestment of dividends and distributions | | | 386,500 | | | | 143,716 | | | | | | 3,598,318 | | | | 1,576,563 | |
Shares redeemed | | | (309,798 | ) | | | (317,045 | ) | | | | | (3,479,545 | ) | | | (3,918,937 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase | | | 217,879 | | | | 326 | | | | | $ | 1,637,325 | | | $ | (165,693 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Concentration of Risk—Although the Portfolio does not invest directly in real estate, it invests primarily in real estate equity securities and has a policy of concentration of its investments in the real estate industry. Therefore, an investment in the Portfolio is subject to certain risks associated with the direct ownership of real estate and with the real estate industry in general. To the extent that assets underlying the Portfolio’s investments are concentrated geographically, by property type or in certain other respects, the Portfolio may be subject to additional risks.
In addition, investing in Real Estate Investment Trusts (“REITs”) involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. REITs are dependent upon management skills, are not diversified, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs are also subject to the possibilities of failing to qualify for tax-free pass-through of income under the Internal Revenue Code and failing to maintain their exemptions from registration under the 1940 Act. REITs (especially mortgage REITs) also are subject to interest rate risks.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
17
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
NOTESTO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 3,854,873 | | | $ | 3,797,777 | |
Net long-term capital gains | | | 10,004,890 | | | | 6,444,036 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 13,859,763 | | | $ | 10,241,813 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 979,403 | |
Undistributed capital gains | | | 4,060,902 | |
Unrealized appreciation/(depreciation) | | | 9,631,820 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 14,672,125 | |
| | | | |
(a) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales and the tax treatment of partnership investments. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to foreign currency reclassifications resulted in a net decrease in undistributed net investment income and a net increase in accumulated net realized gain on investment and foreign currency transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
18
| | |
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $11.18 | | | | $12.25 | | | | $11.58 | | | | $12.02 | | | | $9.64 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .14 | | | | .24 | | | | .18 | | | | .11 | | | | .23 | |
Net realized and unrealized gain on investment and foreign currency transactions | | | 2.39 | | | | .24 | | | | 2.21 | | | | 1.02 | | | | 2.30 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 2.53 | | | | .48 | | | | 2.39 | | | | 1.13 | | | | 2.53 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.37 | ) | | | (.20 | ) | | | (.15 | ) | | | (.18 | ) | | | (.15 | ) |
Distributions from net realized gain on investment transactions | | | (3.34 | ) | | | (1.35 | ) | | | (1.57 | ) | | | (1.39 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (3.71 | ) | | | (1.55 | ) | | | (1.72 | ) | | | (1.57 | ) | | | (.15 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.00 | | | | $11.18 | | | | $12.25 | | | | $11.58 | | | | $12.02 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 25.35 | % | | | 4.20 | % | | | 21.19 | % | | | 9.03 | %* | | | 26.34 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $38,003 | | | | $31,576 | | | | $70,048 | | | | $63,093 | | | | $66,493 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.08 | % | | | .86 | % | | | .84 | % | | | .88 | % | | | .87 | %+ |
Net investment income | | | 1.26 | % | | | 1.92 | % | | | 1.49 | % | | | .91 | % | | | 2.15 | %+ |
Portfolio turnover rate | | | 67 | % | | | 98 | % | | | 110 | % | | | 114 | % | | | 132 | % |
See footnote summary on page 20.
19
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
FINANCIAL HIGHLIGHTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $11.22 | | | | $12.28 | | | | $11.61 | | | | $12.05 | | | | $9.67 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .11 | | | | .27 | | | | .15 | | | | .08 | | | | .20 | |
Net realized and unrealized gain on investment and foreign currency transactions | | | 2.40 | | | | .18 | | | | 2.20 | | | | 1.02 | | | | 2.31 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 2.51 | | | | .45 | | | | 2.35 | | | | 1.10 | | | | 2.51 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.34 | ) | | | (.16 | ) | | | (.11 | ) | | | (.15 | ) | | | (.13 | ) |
Distributions from net realized gain on investment transactions | | | (3.34 | ) | | | (1.35 | ) | | | (1.57 | ) | | | (1.39 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (3.68 | ) | | | (1.51 | ) | | | (1.68 | ) | | | (1.54 | ) | | | (.13 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.05 | | | | $11.22 | | | | $12.28 | | | | $11.61 | | | | $12.05 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 24.96 | % | | | 3.97 | % | | | 20.83 | % | | | 8.75 | %* | | | 26.05 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $13,301 | | | | $12,394 | | | | $13,568 | | | | $13,536 | | | | $14,479 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.33 | % | | | 1.15 | % | | | 1.10 | % | | | 1.13 | % | | | 1.13 | %+ |
Net investment income | | | 1.03 | % | | | 2.13 | % | | | 1.19 | % | | | .64 | % | | | 1.89 | %+ |
Portfolio turnover rate. | | | 67 | % | | | 98 | % | | | 110 | % | | | 114 | % | | | 132 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the year ended December 31, 2011 by 0.06%. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
20
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| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Real Estate Investment Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Real Estate Investment Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Real Estate Investment Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
21
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| | |
2014 TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 1.35% of dividends paid qualify for the dividends received deduction.
22
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| | |
REAL ESTATE INVESTMENT | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Eric J. Franco(2), Vice President Emilie D. Wrapp, Secretary | | Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
|
|
| | |
| | |
CUSTODIANAND ACCOUNTING AGENT | | LEGAL COUNSEL |
State Street Bank and Trust Company | | Seward & Kissel LLP |
State Street Corporation CCB/5 | | One Battery Park Plaza |
1 Iron Street | | New York, NY 10004 |
Boston, MA 02210 | | |
| | |
DISTRIBUTOR | | TRANSFER AGENT |
AllianceBernstein Investments, Inc. | | AllianceBernstein Investor Services, Inc. |
1345 Avenue of the Americas | | P.O. Box 786003 |
New York, NY 10105 | | San Antonio, TX 78278-6003 |
| | Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | | |
Ernst & Young LLP | | |
5 Times Square | | |
New York, NY 10036 | | |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the REIT Senior Investment Management Team. Mr. Eric J. Franco is the investment professional with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
23
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| | |
REAL ESTATE INVESTMENT | | |
PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
MANAGEMENTOFTHE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2006, and interim CEO 1999-2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007, and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999-June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989-May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001-2008. | | | 116 | | | None |
| | | | | | | | |
24
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| | |
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002-May 2006); Partner, Clifford Chance (1992-2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985-1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982-1985); and Attorney Advisor, U.S. Department of the Treasury (1973-1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
25
| | |
REAL ESTATE INVESTMENT PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995-2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993-1995); and Partner, Ernst & Young LLP (1975-1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund as defined in the “1940 Act”, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
26
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| | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
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NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
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Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
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Eric J. Franco 54 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
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Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
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Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
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Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
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Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
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REAL ESTATE INVESTMENT PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Real Estate Investment Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
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Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($ MIL) |
Real Estate Investment Portfolio | | Value | | 0.55% on first $2.5 billion 0.45% on next $2.5 billion 0.40% on the balance | | $46.7 |
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
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| | AllianceBernstein Variable Products Series Fund |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $55,158 (0.070% of the Portfolio’s average daily net assets) for such services.
Set forth below are the Portfolio’s total expense ratios for the most recently completed fiscal year:
| | | | | | |
Portfolio | | Total Expense Ratio | | Fiscal Year | |
Real Estate Investment Portfolio | | Class A 0.86% Class B 1.15% | | | December 31 | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
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Portfolio | | Net Assets 3/31/14 ($ MIL) | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Real Estate Investment Portfolio | | $46.7 | | U.S. REIT Schedule 0.55% on first $25m 0.45% on next $25m 0.40% the balance Minimum account size $25m | | | 0.504 | % | | | 0.550 | % |
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
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REAL ESTATE INVESTMENT PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser also manages AllianceBernstein Global Real Estate Investment Fund, Inc. (“Global Real Estate Investment Fund, Inc.), a retail mutual fund, which has a somewhat investment style as the Portfolio. Set forth below are the fee schedule of Global Real Estate Investment Fund, Inc. and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio: 6
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Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Real Estate Investment Portfolio7 | | Global Real Estate Investment Fund, Inc. | | 0.55% on first $2.5 billion 0.45% on next $2.5 billion 0.40% on the balance | | | 0.550% | | | | 0.550% | |
The Adviser also manages and sponsors retail mutual funds, which are organized in jurisdictions outside the United States, generally Luxembourg and Japan, and sold to non-United States resident investors. The Adviser charges the following fees for the Luxembourg fund that has a somewhat similar investment style as the Portfolio.8
| | | | |
Fund | | Fee9 | |
Global Real Estate Securities Portfolio | | | | |
Class A | | | 1.50 | % |
Class I (Institutional) | | | 0.70 | % |
The Adviser represented that it does not sub-advise any registered investment company with a substantially similar investment style as the Portfolio.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.10 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.11,12
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/
6 | | The Portfolio’s investment guidelines are more restrictive than that of AllianceBernstein Global Real Estate Investment Fund, Inc. The Portfolio primarily invests in equity securities of U.S. real estate investment trusts (“REITS”) and other U.S. real estate industry companies, in contrast to the AllianceBernstein Global Real Estate Investment Fund, Inc., which may invest in equities of non-U.S. REITS and other non-U.S. real estate industry companies. |
7 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
8 | | The Portfolio’s investment guidelines are more restrictive than that of the Luxembourg fund. The Portfolio primarily invests in equity securities of U.S. real estate investment trusts (“REITS”) and other U.S. real estate industry companies, in contrast to the Luxembourg fund, which may invest in equities of non-U.S. REITS and other non-U.S. real estate industry companies. |
9 | | Class A shares of the funds are charged an “all-in” fee, which includes investment advisory services and distribution related services, unlike Class I shares, whose fee is for only investment advisory services. |
10 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
11 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
12 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
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| | AllianceBernstein Variable Products Series Fund |
objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
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Portfolio | | Contractual Management Fee (%)13 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Real Estate Investment Portfolio | | | 0.550 | | | | 0.750 | | | | 3/11 | |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU14 is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.
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Portfolio | | Expense Ratio (%)15 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Real Estate Investment Portfolio | | | 0.860 | | | | 0.860 | | | | 6/11 | | | | 0.860 | | | | 8/15 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $34,520 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $72,749 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional
13 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
14 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
15 | | Most recently completed fiscal year end Class A total expense ratio. |
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REAL ESTATE INVESTMENT PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.16
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.17,18 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.19 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
16 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
17 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
18 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones V. Harris at 1429. |
19 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
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| | AllianceBernstein Variable Products Series Fund |
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio20 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)21 for the periods ended February 28, 2014.22
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| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Real Estate Investment Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 5.51 | | | | 6.79 | | | | 6.79 | | | | 10/11 | | | | 15/17 | |
3 year | | | 11.04 | | | | 9.20 | | | | 9.39 | | | | 1/11 | | | | 1/16 | |
5 year | | | 29.18 | | | | 28.81 | | | | 29.00 | | | | 5/11 | | | | 8/16 | |
10 year | | | 9.83 | | | | 8.97 | | | | 9.30 | | | | 2/9 | | | | 4/13 | |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)23 versus its benchmarks.24 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.25
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| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
Real Estate Investment Portfolio | | | 5.51 | | | | 11.04 | | | | 29.18 | | | | 9.83 | | | | 10.04 | | | | 24.97 | | | | 0.44 | | | | 10 | |
FTSE NAREIT Equity REIT Index26 | | | 5.98 | | | | 9.80 | | | | 29.24 | | | | 8.81 | | | | 9.53 | | | | 25.79 | | | | 0.40 | | | | 10 | |
S&P 500 Stock Index | | | 25.37 | | | | 14.35 | | | | 23.00 | | | | 7.16 | | | | 7.32 | | | | N/A | | | | N/A | | | | 10 | |
Inception Date: January 9, 1997 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
20 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
21 | | The Portfolio’s PG is identical to the Portfolio’s respective EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
22 | | Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
23 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
24 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
25 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
26 | | Benchmark since inception date is the nearest month end after the Portfolio’s inception date. |
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VPS-REI-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | SMALL CAP GROWTH PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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SMALL CAP GROWTH PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Small Cap Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
Effective February 1, 2013, the Portfolio is closed to new investments except that Contractholders of variable products with investment options that included the Portfolio as of January 31, 2013, may continue to purchase shares of the Portfolio in accordance with the procedures for the purchase of shares in the prospectus of the separate account in which they invest, including through reinvestment of dividends and capital gains distributions. The Portfolio may (i) make additional exceptions that, in the Adviser’s judgment, do not adversely affect the Adviser’s ability to manage the Portfolio; (ii) reject any investment or refuse any exception, including those detailed above, that the Adviser believes will adversely affect its ability to manage the Portfolio; and (iii) close and/or reopen the Portfolio to new or existing Contractholders at any time.
INVESTMENT OBJECTIVES AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in a diversified portfolio of equity securities with relatively smaller capitalizations as compared to the overall U.S. market. Under normal circumstances, the Portfolio invests at least 80% of its net assets in equity securities of smaller companies. For these purposes, “smaller companies” are those that, at the time of investment, fall within the lowest 20% of the total U.S. equity market. Because the Portfolio’s definition of smaller companies is dynamic, the limits on market capitalization will change with the markets.
The Portfolio may invest in any company and industry and in any type of equity security with potential for capital appreciation. It invests in well-known and established companies and in new and less-seasoned companies. The Portfolio’s investment policies emphasize investments in companies that are demonstrating improving financial results and a favorable earnings outlook. The Portfolio may invest in foreign securities.
The Portfolio invests primarily in equity securities but may also invest in other types of securities, such as preferred stocks. The Portfolio may, at times, invest in shares of exchange-traded fund (“ETFs”) in lieu of making direct investments in securities. ETFs may provide more efficient and economical exposure to the types of companies and geographic locations in which the Portfolio seeks to invest than direct investments. The Portfolio may also invest up to 20% of its total assets in rights or warrants.
INVESTMENT RESULTS
The table on page 3 shows the Portfolio’s performance compared to its benchmark, the Russell 2000 Growth Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio underperformed the benchmark during the annual period. Underperformance was primarily driven by stock selection which was negative across most sectors, particularly in the consumer/commercial services and technology. Within the benchmark, health care was the best performing sector for the year, and the Portfolio benefited from positive stock selection in the sector.
Sector allocations, which result from the Portfolio’s “bottom-up” stock selection process, remained muted compared to the benchmark but nonetheless were modestly additive to performance. As of December 31, 2014, compared to the benchmark, financials and industrials were the largest underweights, with technology, health care and consumer/commercial services each modestly overweight. All sector and subsector allocations reflect our bottom-up stock selection process.
The Portfolio did not use derivatives during the annual reporting period.
MARKET REVIEW AND INVESTMENT STRATEGY
Small-cap stocks rallied in the fourth quarter, however, the dichotomy in 2014 between small-cap and large-cap stocks was the largest since 1998. The Portfolio’s investment discipline—which focuses on identifying companies that are well positioned to meet or exceed consensus expectations—was not rewarded during 2014 to the same degree that it has been historically. Fundamental disappointments, on the other hand, continued to be severely punished during the quarter. Throughout 2014, strong, predicted growth substantially underperformed traditional value and this trend was most pronounced during the fourth quarter. Given the investment philosophy and style adherence of the U.S. Small Cap Investment Growth Team (the “Team”), the Portfolio’s typical overexposure to this cohort presented a sizeable headwind.
The Portfolio continues to be built from the bottom up with an emphasis on companies that can deliver fundamental outperformance. Valuations for companies with this profile—those that deliver positive earnings revisions and surprises—remain below the long-term average. Reflecting the Portfolio’s bottom-up investment process, the Team continues to find opportunities across most sectors.
1
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| | |
SMALL CAP GROWTH PORTFOLIO | | |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged Russell 2000® Growth Index does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 2000 Growth Index represents the performance of 2,000 small-cap growth companies within the U.S. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as growth, may underperform the market generally.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Management Risk: The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
2
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| | |
SMALL CAP GROWTH PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Small Cap Growth Portfolio Class A† | | | -1.81% | | | | 18.66% | | | | 9.21% | |
Small Cap Growth Portfolio Class B† | | | -2.08% | | | | 18.37% | | | | 8.93% | |
Russell 2000 Growth Index | | | 5.60% | | | | 16.80% | | | | 8.54% | |
* Average annual returns. † Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014 by 0.01%. Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 1.17% and 1.43% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
SMALL CAP GROWTH PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Small Cap Growth Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the Russell 2000 Growth Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 2.
3
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SMALL CAP GROWTH PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each classes’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 964.20 | | | $ | 5.30 | | | | 1.07 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.81 | | | $ | 5.45 | | | | 1.07 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 963.00 | | | $ | 6.53 | | | | 1.32 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.55 | | | $ | 6.72 | | | | 1.32 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
4
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SMALL CAP GROWTH PORTFOLIO | | |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Acadia Healthcare Co., Inc. | | $ | 1,808,327 | | | | 2.1 | % |
Capella Education Co. | | | 1,708,435 | | | | 1.9 | |
PolyOne Corp. | | | 1,629,827 | | | | 1.9 | |
Five Below, Inc. | | | 1,602,537 | | | | 1.8 | |
Akorn, Inc. | | | 1,526,952 | | | | 1.7 | |
Team Health Holdings, Inc. | | | 1,491,407 | | | | 1.7 | |
Carlisle Cos., Inc. | | | 1,464,686 | | | | 1.7 | |
Fortinet, Inc. | | | 1,382,183 | | | | 1.6 | |
Ultimate Software Group, Inc. (The) | | | 1,370,078 | | | | 1.6 | |
Middleby Corp. (The) | | | 1,355,688 | | | | 1.5 | |
| | | | | | | | |
| | $ | 15,340,120 | | | | 17.5 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Information Technology | | $ | 23,647,045 | | | | 26.9 | % |
Health Care | | | 21,550,657 | | | | 24.5 | |
Industrials | | | 15,938,934 | | | | 18.2 | |
Consumer Discretionary | | | 12,644,044 | | | | 14.4 | |
Financials | | | 5,025,451 | | | | 5.7 | |
Energy | | | 2,520,086 | | | | 2.9 | |
Consumer Staples | | | 2,348,884 | | | | 2.7 | |
Materials | | | 1,629,827 | | | | 1.9 | |
Telecommunication Services | | | 879,042 | | | | 1.0 | |
Short-Term Investments | | | 1,600,016 | | | | 1.8 | |
| | | | | | | | |
Total Investments | | $ | 87,783,986 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
5
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SMALL CAP GROWTH PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.2% | | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–26.9% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–1.2% | | | | | | | | |
Arista Networks, Inc.(a)(b) | | | 4,987 | | | $ | 303,010 | |
Ruckus Wireless, Inc.(a) | | | 66,514 | | | | 799,498 | |
| | | | | | | | |
| | | | | | | 1,102,508 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–1.2% | | | | | | | | |
Zebra Technologies Corp.–Class A(a) | | | 13,118 | | | | 1,015,464 | |
| | | | | | | | |
INTERNET SOFTWARE & SERVICES–7.0% | | | | | | | | |
CoStar Group, Inc.(a) | | | 3,735 | | | | 685,858 | |
Dealertrack Technologies, Inc.(a) | | | 26,147 | | | | 1,158,574 | |
Envestnet, Inc.(a) | | | 23,119 | | | | 1,136,068 | |
HomeAway, Inc.(a) | | | 23,271 | | | | 693,010 | |
LogMeIn, Inc.(a) | | | 20,129 | | | | 993,165 | |
New Relic, Inc.(a) | | | 2,792 | | | | 97,273 | |
Pandora Media, Inc.(a) | | | 35,679 | | | | 636,157 | |
Shutterstock, Inc.(a)(b) | | | 10,954 | | | | 756,921 | |
| | | | | | | | |
| | | | | | | 6,157,026 | |
| | | | | | | | |
IT SERVICES–1.0% | | | | | | | | |
VeriFone Systems, Inc.(a) | | | 23,153 | | | | 861,292 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–6.2% | | | | | | | | |
Cavium, Inc.(a) | | | 18,214 | | | | 1,125,990 | |
Intersil Corp.–Class A | | | 46,238 | | | | 669,064 | |
Mellanox Technologies Ltd.(a) | | | 21,163 | | | | 904,295 | |
Monolithic Power Systems, Inc. | | | 22,849 | | | | 1,136,509 | |
Silicon Laboratories, Inc.(a) | | | 15,084 | | | | 718,300 | |
Synaptics, Inc.(a) | | | 12,885 | | | | 887,003 | |
| | | | | | | | |
| | | | | | | 5,441,161 | |
| | | | | | | | |
SOFTWARE–10.3% | | | | | | | | |
Aspen Technology, Inc.(a) | | | 26,882 | | | | 941,408 | |
Fortinet, Inc.(a) | | | 45,081 | | | | 1,382,183 | |
Guidewire Software, Inc.(a) | | | 21,416 | | | | 1,084,292 | |
PTC, Inc.(a) | | | 27,564 | | | | 1,010,221 | |
SolarWinds, Inc.(a) | | | 25,321 | | | | 1,261,745 | |
SS&C Technologies Holdings, Inc. | | | 17,952 | | | | 1,050,013 | |
Tableau Software, Inc.– Class A(a) | | | 11,440 | | | | 969,654 | |
Ultimate Software Group, Inc. (The)(a) | | | 9,332 | | | | 1,370,078 | |
| | | | | | | | |
| | | | | | | 9,069,594 | |
| | | | | | | | |
| | | | | | | 23,647,045 | |
| | | | | | | | |
HEALTH CARE–24.5% | | | | | | | | |
BIOTECHNOLOGY–6.5% | | | | | | | | |
Agios Pharmaceuticals, Inc.(a)(b) | | | 2,708 | | | | 303,404 | |
| | | | | | | | |
Isis Pharmaceuticals, Inc.(a)(b) | | | 10,367 | | | $ | 640,058 | |
Juno Therapeutics, Inc.(a)(b) | | | 2,985 | | | | 155,877 | |
Karyopharm Therapeutics, Inc.(a)(b) | | | 8,659 | | | | 324,106 | |
KYTHERA Biopharmaceuticals, Inc.(a)(b) | | | 8,779 | | | | 304,456 | |
NPS Pharmaceuticals, Inc.(a) | | | 19,228 | | | | 687,785 | |
Otonomy, Inc.(a) | | | 12,293 | | | | 409,726 | |
Puma Biotechnology, Inc.(a)(b) | | | 4,792 | | | | 906,982 | |
Receptos, Inc.(a) | | | 3,858 | | | | 472,644 | |
Sage Therapeutics, Inc.(a)(b) | | | 5,534 | | | | 202,544 | |
Synageva BioPharma Corp.(a)(b) | | | 5,698 | | | | 528,717 | |
TESARO, Inc.(a) | | | 13,493 | | | | 501,805 | |
Ultragenyx Pharmaceutical, Inc.(a)(b) | | | 6,428 | | | | 282,061 | |
| | | | | | | | |
| | | | | | | 5,720,165 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–6.8% | | | | | | | | |
Align Technology, Inc.(a) | | | 14,712 | | | | 822,548 | |
Cardiovascular Systems, Inc.(a) | | | 22,623 | | | | 680,500 | |
HeartWare International, Inc.(a) | | | 10,383 | | | | 762,424 | |
Insulet Corp.(a) | | | 19,634 | | | | 904,342 | |
K2M Group Holdings, Inc.(a) | | | 28,459 | | | | 593,939 | |
LDR Holding Corp.(a) | | | 27,213 | | | | 892,042 | |
Nevro Corp.(a) | | | 8,596 | | | | 332,407 | |
Sirona Dental Systems, Inc.(a) | | | 9,983 | | | | 872,215 | |
Tandem Diabetes Care, Inc.(a)(b) | | | 10,907 | | | | 138,519 | |
| | | | | | | | |
| | | | | | | 5,998,936 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–4.7% | | | | | | | | |
Acadia Healthcare Co., Inc.(a) | | | 29,543 | | | | 1,808,327 | |
Premier, Inc.–Class A(a) | | | 25,360 | | | | 850,321 | |
Team Health Holdings, Inc.(a) | | | 25,924 | | | | 1,491,407 | |
| | | | | | | | |
| | | | | | | 4,150,055 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–1.5% | | | | | | | | |
ICON PLC(a) | | | 14,747 | | | | 751,950 | |
PAREXEL International Corp.(a) | | | 9,334 | | | | 518,597 | |
| | | | | | | | |
| | | | | | | 1,270,547 | |
| | | | | | | | |
PHARMACEUTICALS–5.0% | | | | | | | | |
Akorn, Inc.(a) | | | 42,181 | | | | 1,526,952 | |
Aratana Therapeutics, Inc.(a) | | | 24,317 | | | | 433,329 | |
GW Pharmaceuticals PLC (ADR)(a)(b) | | | 4,934 | | | | 333,933 | |
Jazz Pharmaceuticals PLC(a) | | | 4,873 | | | | 797,856 | |
Pacira Pharmaceuticals, Inc./DE(a) | | | 7,708 | | | | 683,391 | |
Revance Therapeutics, Inc.(a)(b) | | | 12,760 | | | | 216,155 | |
Tetraphase Pharmaceuticals, Inc.(a) | | | 10,560 | | | | 419,338 | |
| | | | | | | | |
| | | | | | | 4,410,954 | |
| | | | | | | | |
| | | | | | | 21,550,657 | |
| | | | | | | | |
6
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INDUSTRIALS–18.2% | | | | | | | | |
AEROSPACE & DEFENSE–1.6% | | | | | | | | |
Hexcel Corp.(a) | | | 31,836 | | | $ | 1,320,876 | |
KEYW Holding Corp. (The)(a) | | | 10,272 | | | | 106,623 | |
| | | | | | | | |
| | | | | | | 1,427,499 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–1.5% | | | | | | | | |
Dycom Industries, Inc.(a) | | | 38,091 | | | | 1,336,613 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–1.7% | | | | | | | | |
Carlisle Cos., Inc. | | | 16,231 | | | | 1,464,686 | |
| | | | | | | | |
MACHINERY–7.3% | | | | | | | | |
Actuant Corp.–Class A | | | 20,443 | | | | 556,867 | |
IDEX Corp. | | | 17,115 | | | | 1,332,232 | |
Lincoln Electric Holdings, Inc. | | | 17,703 | | | | 1,223,100 | |
Middleby Corp. (The)(a) | | | 13,680 | | | | 1,355,688 | |
RBC Bearings, Inc. | | | 12,732 | | | | 821,596 | |
Valmont Industries, Inc.(b) | | | 8,503 | | | | 1,079,881 | |
| | | | | | | | |
| | | | | | | 6,369,364 | |
| | | | | | | | |
MARINE–1.4% | | | | | | | | |
Kirby Corp.(a) | | | 14,857 | | | | 1,199,554 | |
| | | | | | | | |
PROFESSIONAL SERVICES–1.2% | | | | | | | | |
TrueBlue, Inc.(a) | | | 48,827 | | | | 1,086,401 | |
| | | | | | | | |
ROAD & RAIL–1.4% | | | | | | | | |
Genesee & Wyoming, Inc.– Class A(a) | | | 13,613 | | | | 1,224,081 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–2.1% | | | | | | | | |
H&E Equipment Services, Inc. | | | 29,810 | | | | 837,363 | |
United Rentals, Inc.(a) | | | 9,738 | | | | 993,373 | |
| | | | | | | | |
| | | | | | | 1,830,736 | |
| | | | | | | | |
| | | | | | | 15,938,934 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–14.4% | | | | | | | | |
DISTRIBUTORS–2.8% | | | | | | | | |
LKQ Corp.(a) | | | 40,679 | | | | 1,143,894 | |
Pool Corp. | | | 20,569 | | | | 1,304,897 | |
| | | | | | | | |
| | | | | | | 2,448,791 | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–3.3% | | | | | | | | |
Bright Horizons Family Solutions, Inc.(a) | | | 24,700 | | | | 1,161,147 | |
Capella Education Co. | | | 22,199 | | | | 1,708,435 | |
| | | | | | | | |
| | | | | | | 2,869,582 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–2.5% | | | | | | | | |
Buffalo Wild Wings, Inc.(a) | | | 7,355 | | | | 1,326,695 | |
Zoe’s Kitchen, Inc.(a)(b) | | | 29,383 | | | | 878,845 | |
| | | | | | | | |
| | | | | | | 2,205,540 | |
| | | | | | | | |
| | | | | | | | |
HOUSEHOLD DURABLES–1.0% | | | | | | | | |
Tempur Sealy International, Inc.(a) | | | 16,879 | | | $ | 926,826 | |
| | | | | | | | |
MEDIA–0.9% | | | | | | | | |
National CineMedia, Inc. | | | 54,223 | | | | 779,184 | |
| | | | | | | | |
MULTILINE RETAIL–1.4% | | | | | | | | |
Tuesday Morning Corp.(a) | | | 56,431 | | | | 1,224,553 | |
| | | | | | | | |
SPECIALTY RETAIL–2.5% | | | | | | | | |
Cabela’s, Inc.(a) | | | 11,137 | | | | 587,031 | |
Five Below, Inc.(a) | | | 39,249 | | | | 1,602,537 | |
| | | | | | | | |
| | | | | | | 2,189,568 | |
| | | | | | | | |
| | | | | | | 12,644,044 | |
| | | | | | | | |
FINANCIALS–5.7% | | | | | | | | |
BANKS–4.4% | | | | | | | | |
City National Corp./CA | | | 10,407 | | | | 840,990 | |
Iberiabank Corp. | | | 12,813 | | | | 830,923 | |
Signature Bank/New York NY(a) | | | 8,393 | | | | 1,057,182 | |
SVB Financial Group(a) | | | 9,717 | | | | 1,127,852 | |
| | | | | | | | |
| | | | | | | 3,856,947 | |
| | | | | | | | |
CAPITAL MARKETS–1.2% | | | | | | | | |
Artisan Partners Asset Management, Inc.–Class A | | | 2,511 | | | | 126,881 | |
Stifel Financial Corp.(a) | | | 19,134 | | | | 976,217 | |
| | | | | | | | |
| | | | | | | 1,103,098 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–0.1% | | | | | | | | |
On Deck Capital, Inc.(a)(b) | | | 2,916 | | | | 65,406 | |
| | | | | | | | |
| | | | | | | 5,025,451 | |
| | | | | | | | |
ENERGY–2.9% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–1.7% | | | | | | | | |
Dril-Quip, Inc.(a) | | | 8,645 | | | | 663,331 | |
Oil States International, Inc.(a) | | | 7,975 | | | | 389,977 | |
Superior Energy Services, Inc. | | | 21,931 | | | | 441,910 | |
| | | | | | | | |
| | | | | | | 1,495,218 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–1.2% | | | | | | | | |
Laredo Petroleum, Inc.(a)(b) | | | 28,766 | | | | 297,728 | |
Matador Resources Co.(a) | | | 28,089 | | | | 568,240 | |
Oasis Petroleum, Inc.(a) | | | 9,607 | | | | 158,900 | |
| | | | | | | | |
| | | | | | | 1,024,868 | |
| | | | | | | | |
| | | | | | | 2,520,086 | |
| | | | | | | | |
CONSUMER STAPLES–2.7% | | | | | | | | |
FOOD & STAPLES RETAILING–1.9% | | | | | | | | |
Chefs’ Warehouse, Inc. (The)(a) | | | 29,625 | | | | 682,560 | |
Sprouts Farmers Market, Inc.(a) | | | 28,471 | | | | 967,444 | |
| | | | | | | | |
| | | | | | | 1,650,004 | |
| | | | | | | | |
7
| | |
SMALL CAP GROWTH PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
FOOD PRODUCTS–0.8% | | | | | | | | |
Freshpet, Inc.(a)(b) | | | 40,966 | | | $ | 698,880 | |
| | | | | | | | |
| | | | | | | 2,348,884 | |
| | | | | | | | |
MATERIALS–1.9% | | | | | | | | |
CHEMICALS–1.9% | | | | | | | | |
PolyOne Corp. | | | 42,992 | | | | 1,629,827 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–1.0% | | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–1.0% | | | | | | | | |
RingCentral, Inc.–Class A(a)(b) | | | 58,917 | | | | 879,042 | |
| | | | | | | | |
Total Common Stocks (cost $73,823,456) | | | | | | | 86,183,970 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–1.8% | | | | | | | | |
TIME DEPOSIT–1.8% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $1,600,016) | | $ | 1,600 | | | | 1,600,016 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–100.0% (cost $75,423,472) | | | | | | | 87,783,986 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–9.5% | | | | | | | | |
Investment Companies–9.5% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(c)(d) (cost $8,367,306) | | | 8,367,306 | | | $ | 8,367,306 | |
| | | | | | | | |
TOTAL INVESTMENTS–109.5% (cost $83,790,778) | | | | | | | 96,151,292 | |
Other assets less liabilities–(9.5)% | | | | | | | (8,333,621 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 87,817,671 | |
| | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
(d) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
Glossary:
ADR—American Depositary Receipt
See notes to financial statements.
8
| | |
SMALL CAP GROWTH PORTFOLIO |
STATEMENT OF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $75,423,472) | | $ | 87,783,986 | (a) |
Affiliated issuers (cost $8,367,306—investment of cash collateral for securities loaned) | | | 8,367,306 | |
Receivable for investment securities sold | | | 313,330 | |
Dividends and interest receivable | | | 36,873 | |
Receivable for capital stock sold | | | 1,647 | |
| | | | |
Total assets | | | 96,503,142 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 8,326,720 | |
Payable for capital stock redeemed | | | 96,803 | |
Payable for investment securities purchased | | | 73,405 | |
Advisory fee payable | | | 55,643 | |
Collateral due to Securities Lending Agent | | | 40,586 | |
Distribution fee payable | | | 12,620 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 67,272 | |
| | | | |
Total liabilities | | | 8,685,471 | |
| | | | |
NET ASSETS | | $ | 87,817,671 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 4,327 | |
Additional paid-in capital | | | 67,066,042 | |
Accumulated net realized gain on investment transactions | | | 8,386,788 | |
Net unrealized appreciation on investments | | | 12,360,514 | |
| | | | |
| | $ | 87,817,671 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 28,054,556 | | | | 1,338,134 | | | $ | 20.97 | |
B | | $ | 59,763,115 | | | | 2,988,762 | | | $ | 20.00 | |
(a) | | Includes securities on loan with a value of $8,129,520 (see Note E). |
See notes to financial statements.
9
| | |
SMALL CAP GROWTH PORTFOLIO |
STATEMENTOF OPERATIONS |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers | | $ | 267,502 | |
Affiliated issuers | | | 2,251 | |
Interest | | | 172 | |
Securities lending income | | | 82,279 | |
| | | | |
| | | 352,204 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 588,638 | |
Distribution fee—Class B | | | 120,835 | |
Transfer agency—Class A | | | 2,582 | |
Transfer agency—Class B | | | 4,010 | |
Custodian | | | 109,808 | |
Administrative | | | 48,434 | |
Audit and tax | | | 40,078 | |
Legal | | | 31,142 | |
Printing | | | 25,392 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 7,997 | |
| | | | |
Total expenses | | | 983,419 | |
| | | | |
Net investment loss | | | (631,215 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 9,013,711 | |
Net change in unrealized appreciation/depreciation of investments | | | (9,940,125 | ) |
| | | | |
Net loss on investment transactions | | | (926,414 | ) |
| | | | |
NET DECREASE IN NET ASSETS FROM OPERATIONS | | $ | (1,557,629 | ) |
| | | | |
See notes to financial statements.
10
| | |
| | |
SMALL CAP GROWTH PORTFOLIO |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment loss | | $ | (631,215 | ) | | $ | (683,040 | ) |
Net realized gain on investment transactions | | | 9,013,711 | | | | 9,317,581 | |
Net change in unrealized appreciation/depreciation of investments | | | (9,940,125 | ) | | | 14,956,858 | |
| | | | | | | | |
Net increase (decrease) in net assets from operations | | | (1,557,629 | ) | | | 23,591,399 | |
DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (2,611,292 | ) | | | (4,909,967 | ) |
Class B | | | (6,233,643 | ) | | | (5,425,603 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase | | | 26,582,247 | | | | 4,452,720 | |
| | | | | | | | |
Total increase | | | 16,179,683 | | | | 17,708,549 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 71,637,988 | | | | 53,929,439 | |
| | | | | | | | |
End of period (including accumulated net investment loss of $0 and $0, respectively) | | $ | 87,817,671 | | | $ | 71,637,988 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
SMALL CAP GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Small Cap Growth Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
Effective February 1, 2013, the Portfolio was closed to new investments except that Contractholders of variable products with investment options that included the Portfolio as of January 31, 2013, may continue to purchase shares of the Portfolio in accordance with the procedures for the purchase of shares in the prospectus of the separate account in which they invest, including through reinvestment of dividends and capital gains distributions.
The Portfolio may (i) make additional exceptions that, in the Adviser’s judgment, do not adversely affect the Adviser’s ability to manage the Portfolio; (ii) reject any investment or refuse any exception, including those detailed above, that the Adviser believes will adversely affect its ability to manage the Portfolio; and (iii) close and/or reopen the Portfolio to new or existing Contractholders at any time.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
12
| | |
| | AllianceBernstein Variable Products Series Fund |
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 86,183,970 | | | $ | –0 | – | | $ | –0 | – | | $ | 86,183,970 | |
Short-Term Investments | | | –0 | – | | | 1,600,016 | | | | –0 | – | | | 1,600,016 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 8,367,306 | | | | –0 | – | | | –0 | – | | | 8,367,306 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 94,551,276 | | | | 1,600,016 | | | | –0 | – | | | 96,151,292 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 94,551,276 | | | $ | 1,600,016 | | | $ | –0 | – | | $ | 96,151,292 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
13
| | |
SMALL CAP GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
14
| | |
| | AllianceBernstein Variable Products Series Fund |
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,434.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $106,179, of which $45 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 81,581,899 | | | $ | 65,065,930 | |
15
| | |
SMALL CAP GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 84,700,673 | |
| | | | |
Gross unrealized appreciation | | | 14,982,810 | |
Gross unrealized depreciation | | | (3,532,191 | ) |
| | | | |
Net unrealized appreciation | | $ | 11,450,619 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $8,129,520 and had received cash collateral which has been invested into AB Exchange Reserves of $8,367,306. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $82,279 and $2,251 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 1,764 | | | $ | 36,450 | | | $ | 29,847 | | | $ | 8,367 | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 93,536 | | | | 175,197 | | | | | $ | 2,149,104 | | | $ | 3,755,689 | |
Shares issued in reinvestment of distributions | | | 125,906 | | | | 242,587 | | | | | | 2,611,292 | | | | 4,909,967 | |
Shares redeemed | | | (308,990 | ) | | | (439,402 | ) | | | | | (6,924,093 | ) | | | (9,575,673 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (89,548 | ) | | | (21,618 | ) | | | | $ | (2,163,697 | ) | | $ | (910,017 | ) |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,685,097 | | | | 425,918 | | | | | $ | 37,054,999 | | | $ | 9,109,480 | |
Shares issued in reinvestment of distributions | | | 314,831 | | | | 278,808 | | | | | | 6,233,643 | | | | 5,425,603 | |
Shares redeemed | | | (702,851 | ) | | | (453,555 | ) | | | | | (14,542,698 | ) | | | (9,172,346 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase | | | 1,297,077 | | | | 251,171 | | | | | $ | 28,745,944 | | | $ | 5,362,737 | |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
17
| | |
SMALL CAP GROWTH PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Net long-term capital gains | | $ | 8,844,935 | | | $ | 10,335,570 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 8,844,935 | | | $ | 10,335,570 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed net capital gain | | $ | 9,296,683 | |
Unrealized appreciation/(depreciation) | | | 11,450,619 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 20,747,302 | |
| | | | |
(a) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to the disallowance of a net operating loss resulted in a net decrease in accumulated net investment loss and a net decrease in additional paid-in capital. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
18
| | |
|
SMALL CAP GROWTH PORTFOLIO |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $23.47 | | | | $18.96 | | | | $17.09 | | | | $16.36 | | | | $11.95 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment loss (a) | | | (.15 | ) | | | (.21 | ) | | | (.12 | ) | | | (.15 | ) | | | (.13 | ) |
Net realized and unrealized gain (loss) on investment transactions | | | (.30 | ) | | | 8.30 | | | | 2.69 | | | | .88 | | | | 4.54 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | (.45 | ) | | | 8.09 | | | | 2.57 | | | | .73 | | | | 4.41 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (2.05 | ) | | | (3.58 | ) | | | (.70 | ) | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $20.97 | | | | $23.47 | | | | $18.96 | | | | $17.09 | | | | $16.36 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | (1.81 | )%* | | | 45.66 | %* | | | 15.02 | % | | | 4.46 | %* | | | 36.90 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $28,055 | | | | $33,510 | | | | $27,479 | | | | $29,369 | | | | $29,018 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.11 | % | | | 1.17 | % | | | 1.18 | % | | | 1.18 | % | | | 1.37 | %+ |
Net investment loss | | | (.67 | )% | | | (.96 | )% | | | (.64 | )% | | | (.85 | )% | | | (1.00 | )%+ |
Portfolio turnover rate | | | 84 | % | | | 81 | % | | | 105 | % | | | 92 | % | | | 95 | % |
See footnote summary on page 20.
19
| | |
SMALL CAP GROWTH PORTFOLIO | | |
FINANCIAL HIGHLIGHTS |
(continued) | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $22.54 | | | | $18.36 | | | | $16.61 | | | | $15.94 | | | | $11.67 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment loss (a) | | | (.19 | ) | | | (.25 | ) | | | (.16 | ) | | | (.19 | ) | | | (.16 | ) |
Net realized and unrealized gain (loss) on investment transactions | | | (.30 | ) | | | 8.01 | | | | 2.61 | | | | .86 | | | | 4.43 | |
| | | | | | �� | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | (.49 | ) | | | 7.76 | | | | 2.45 | | | | .67 | | | | 4.27 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (2.05 | ) | | | (3.58 | ) | | | (.70 | ) | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $20.00 | | | | $22.54 | | | | $18.36 | | | | $16.61 | | | | $15.94 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | (2.08 | )%* | | | 45.33 | %* | | | 14.73 | % | | | 4.20 | %* | | | 36.59 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $59,763 | | | | $38,128 | | | | $26,450 | | | | $29,665 | | | | $29,128 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.34 | % | | | 1.43 | % | | | 1.43 | % | | | 1.43 | % | | | 1.62 | %+ |
Net investment loss | | | (.89 | )% | | | (1.21 | )% | | | (.89 | )% | | | (1.11 | )% | | | (1.23 | )%+ |
Portfolio turnover rate. | | | 84 | % | | | 81 | % | | | 105 | % | | | 92 | % | | | 95 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2013, December 31, 2011, and December 31, 2010 by 0.01%, 0.23%, 0.09% and 0.05%, respectively. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
20
| | |
| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Small Cap Growth Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Small Cap Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Small Cap Growth Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
21
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| | |
| | |
SMALL CAP GROWTH PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Bruce K. Aronow(2), Vice President N. Kumar Kirpalani(2), Vice President Samantha S. Lau(2), Vice President Wen-Tse Tseng(2), Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
| | |
CUSTODIANAND ACCOUNTING AGENT | | LEGAL COUNSEL |
State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR | | TRANSFER AGENT |
AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC | | |
ACCOUNTING FIRM | | |
Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The management of, and investment decisions for, the Portfolio’s portfolio are made by the Adviser’s Small Cap Growth Investment Team. Mr. Bruce K. Aronow, Mr. N. Kumar Kirpalani, Ms. Samantha S. Lau and Mr. Wen-Tse Tseng, members of the Adviser’s Small Cap Growth Investment Team, are primarily responsible for the day-to-day management of the Portfolio’s portfolio. |
22
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| | |
SMALL CAP GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007 and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014. |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999–June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989–May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
| | | | | | | | |
23
| | |
SMALL CAP GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
24
| | |
| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes, and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
25
| | |
SMALL CAP GROWTH PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Bruce K. Aronow 48 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
N. Kumar Kirpalani 61 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Samantha S. Lau 42 | | Vice President | | Senior Vice President of the Adviser**, with which she has been associated since prior to 2010. |
| | | | |
Wen-Tse Tseng 49 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | The Adviser, ABI and ABIS are affiliates of the Fund. |
| The Fund’s Statement of Additional Information (SAI) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www. abglobal.com, for a free prospectus or SAI. |
26
| | |
| | |
SMALL CAP GROWTH PORTFOLIO |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Small Cap Growth Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($ MIL) |
Small Cap Growth Portfolio | | Growth | | 0.75% on first $2.5 billion
0.65% on next $2.5 billion 0.60% on the balance | | $70.6 |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $57,354 (0.091% of the Portfolio’s average daily net assets) for such services.
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
27
| | |
SMALL CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Set forth below are the Portfolio’s total expense ratios for the most recently completed fiscal year:
| | | | |
Portfolio | | Total Expense Ratio | | Fiscal Year |
Small Cap Growth Portfolio | | Class A 1.17% | | December 31 |
| | Class B 1.43% | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($ MIL) | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Small Cap Growth Portfolio | | $70.6 | | Small Cap Growth Schedule 1.00% on first $50m 0.85% on the next $50m 0.75% on the balance Minimum account size $25m | | | 0.956% | | | | 0.750% | |
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
28
| | |
| | AllianceBernstein Variable Products Series Fund |
The Adviser also manages AllianceBernstein Cap Fund, Inc.—Small Cap Growth Portfolio (“Cap Fund, Inc.—Small Cap Growth Portfolio”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Cap Fund, Inc.—Small Cap Growth Portfolio and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Small-Cap Growth Portfolio7 | | Cap Fund, Inc.—Small Cap Growth Portfolio | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750% | | | | 0.750% | |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families. The Adviser charges the fees set forth below for the sub-advisory relationships that have a somewhat similar investment style as the Portfolio. Also shown are the Portfolio’s advisory fee and what would have been the effective advisory fees of the Portfolio had the fee schedules of the sub-advisory relationships been applicable to the Portfolio based on March 31, 2014 net assets.
| | | | | | | | | | | | |
Portfolio | | | | Sub-Advised Fund Fee Schedule | | Effective Sub-Adv. Fee | | | Portfolio Adv. Fee | |
Small Cap Growth Portfolio | | Client #18,9 | | 0.60% on first $1 billion 0.55% on next $500 million 0.50% on next $500 million 0.45% on next $500 million 0.40% on the balance | | | 0.600% | | | | 0.750% | |
| | | | |
| | Client #2 | | 0.55% of average daily net assets | | | 0.550% | | | | 0.750% | |
| | | | |
| | Client #3 | | 0.65% on 1st $25 million 0.60% on next $75 million 0.55% on the balance | | | 0.618% | | | | 0.750% | |
| | | | |
| | Client #4 | | 0.45% of average daily net assets | | | 0.450% | | | | 0.750% | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser. In addition, to the extent that certain of these sub-advisory relationships are with affiliates of the Adviser, the fee schedules may not reflect arm’s length bargaining or negotiations.
While it appears that the sub-advisory relationships are paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such lower fees due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationships. There could be various business reasons why an investment adviser would be willing to provide a sub-advisory relationship investment related services at a different fee level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management, generally required by a registered investment company.
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The advisory fee of AllianceBernstein Cap Fund, Inc.—Small Cap Growth Portfolio is based on the mutual fund’s net assets at the end of each quarter and is paid to the Adviser quarterly, in contrast to the Portfolio, whose advisory fee is based on the Portfolio’s average daily net assets and is paid on a monthly basis. |
8 | | The client is an affiliate of the Adviser. |
9 | | Assets are aggregated with other accounts of the client for purposes of calculating the investment advisory fee. |
29
| | |
SMALL CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.10 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.11,12
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)13 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Small Cap Growth Portfolio | | | 0.750 | | | | 0.900 | | | | 1/13 | |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.14
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)15 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Small Cap Growth Portfolio | | | 1.175 | | | | 0.990 | | | | 13/13 | | | | 0.956 | | | | 38/38 | |
Based on this analysis, the Portfolio has a more favorable ranking on contractual management fee basis than they do on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into
10 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
11 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
12 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
13 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. |
14 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
15 | | Most recently completed fiscal year end Class A total expense ratio. |
30
| | |
| | AllianceBernstein Variable Products Series Fund |
the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $79,463 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $171,169 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.16
The Portfolio effected brokerage transactions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) and/or its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” and paid commissions during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted with the Portfolio is comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
16 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
31
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SMALL CAP GROWTH PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.17,18 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.19 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio20 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)21 for the periods ended February 28, 2014.22
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Small Cap Growth Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 47.54 | | | | 37.40 | | | | 35.43 | | | | 2/13 | | | | 2/43 | |
3 year | | | 20.48 | | | | 16.07 | | | | 15.71 | | | | 2/13 | | | | 2/40 | |
5 year | | | 33.21 | | | | 28.14 | | | | 27.65 | | | | 1/13 | | | | 1/37 | |
10 year | | | 11.18 | | | | 9.83 | | | | 9.86 | | | | 1/9 | | | | 2/30 | |
17 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
18 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
19 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
20 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
21 | | The Portfolio’s PG is identical to the Portfolio’s respective EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
22 | | The current Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
32
| | |
| | AllianceBernstein Variable Products Series Fund |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)23 versus its benchmark.24 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.25
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
Small Cap Growth Portfolio | | | 47.54 | | | | 20.48 | | | | 33.21 | | | | 11.18 | | | | 7.49 | | | | 20.76 | | | | 0.53 | | | | 10 | |
Russell 2000 Growth Index | | | 37.06 | | | | 15.98 | | | | 28.05 | | | | 9.19 | | | | 7.00 | | | | 19.31 | | | | 0.50 | | | | 10 | |
Inception Date: August 5, 1996 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
23 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
24 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2014. |
25 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
33
VPS-SCG-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
+ | | SMALL/MID CAP VALUE PORTFOLIO |
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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SMALL/MID CAP VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Small/Mid Cap Value Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in a diversified portfolio of equity securities of small- to mid-capitalization U.S. companies, generally representing 60 to 125 companies. Under normal circumstances, the Portfolio invests at least 80% of its net assets in securities of small- to mid-capitalization companies. Because the Portfolio’s definition of small- to mid-capitalization companies is dynamic, the lower and upper limits on market capitalization will change with the markets. The Portfolio invests in companies that are determined by AllianceBernstein L.P. (the “Adviser”) to be undervalued, using the Adviser’s fundamental value approach. In selecting securities for the Portfolio’s portfolio, the Adviser uses its fundamental and quantitative research to identify companies whose long-term earnings power is not reflected in the current market price of their securities.
The Portfolio may enter into derivatives transactions, such as options, futures, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds (“ETFs”). These transactions may be used, for example, to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Portfolio from a decline in value, sometimes within certain ranges.
The Portfolio may invest in securities issued by non-U.S. companies.
The Portfolio may, at times, invest in shares of ETFs in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
INVESTMENT RESULTS
The table on page 3 shows the Portfolio’s performance compared to its benchmark, the Russell 2500 Value Index, in addition to the broad small/mid-cap universe, as measured by the Russell 2500 Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio outperformed the benchmark during the annual period. The outperformance was driven by strong security selection across most sectors. Stock selection and an overweight position in consumer-cyclicals was the leading contributor to performance.
The energy sector was the worst performing sector in the Russell 2500 Value Index for the year, as a sharp drop in oil prices drove downward the share price of exploration and production companies. The Portfolio’s energy holdings detracted from performance, as weaker cash flows due to lower oil prices threatened companies’ ability to make investments necessary to grow oil production.
The Portfolio did not use derivatives during the reporting period.
MARKET REVIEW AND INVESTMENT STRATEGY
U.S. equity markets saw strong gains in 2014 as economic recovery fueled earnings growth. Although small-cap stocks performed well in the fourth quarter, they lagged large caps for the year as a spike in volatility in September and October drove a sell-off in assets with perceived higher levels of risk.
The current economic climate has allowed the Small/Mid Cap Value Portfolio Senior Investment Management Team (the “Team”) to invest opportunistically in what it considers to be undervalued companies with solid fundamentals, without sacrificing the Portfolio’s deep value discipline. The Portfolio’s emphasis continues to be at the stock-specific level, as the Team looks for companies that offer compelling valuation, strong free cash flow and significant company level catalysts.
1
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SMALL/MID CAP VALUE PORTFOLIO | | |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
Neither the unmanaged Russell 2500 Value Index nor the Russell 2500 Index reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 2500 Value Index represents the performance of 2,500 small- to mid-cap value companies within the U.S. The Russell 2500 Index represents the performance of 2,500 small- to mid-cap cap companies within the U.S. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as value, may underperform the market generally.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Management Risk: The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
2
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SMALL/MID CAP VALUE PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
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THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Small/Mid Cap Value Portfolio Class A | | | 9.20% | | | | 15.79% | | | | 9.07% | |
Small/Mid Cap Value Portfolio Class B | | | 8.95% | | | | 15.49% | | | | 8.82% | |
Russell 2500 Value Index | | | 7.11% | | | | 15.48% | | | | 7.91% | |
Russell 2500 Index | | | 7.07% | | | | 16.36% | | | | 8.72% | |
* Average annual returns. Please keep in mind that high, double-digit returns are highly unusual and cannot be sustained. Investors should also be aware that these returns were primarily achieved during favorable market conditions. | |
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The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.81% and 1.06% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
SMALL/MID CAP VALUE PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in the Small/Mid Cap Value Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the Russell 2500 Value Index and the broad small/mid-cap universe, as represented by the Russell 2500 Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 2.
3
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SMALL/MID CAP VALUE PORTFOLIO |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each class’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,007.10 | | | $ | 4.20 | | | | 0.83 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.02 | | | $ | 4.23 | | | | 0.83 | % |
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Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,005.90 | | | $ | 5.46 | | | | 1.08 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.76 | | | $ | 5.50 | | | | 1.08 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
4
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SMALL/MID CAP VALUE PORTFOLIO | | |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
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COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Office Depot, Inc. | | $ | 12,272,197 | | | | 1.9 | % |
Dean Foods Co. | | | 11,260,168 | | | | 1.7 | |
Bloomin’ Brands, Inc. | | | 11,120,929 | | | | 1.7 | |
Electronic Arts, Inc. | | | 9,876,911 | | | | 1.5 | |
Spirit Aerosystems Holdings, Inc.—Class A | | | 9,860,895 | | | | 1.5 | |
AECOM Technology Corp. | | | 9,818,166 | | | | 1.5 | |
PNM Resources, Inc. | | | 9,540,860 | | | | 1.4 | |
American Financial Group, Inc./OH | | | 9,434,674 | | | | 1.4 | |
Southwest Gas Corp. | | | 9,366,069 | | | | 1.4 | |
Lam Research Corp. | | | 9,085,223 | | | | 1.4 | |
| | | | | | | | |
| | $ | 101,636,092 | | | | 15.4 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
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SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 186,499,075 | | | | 28.3 | % |
Information Technology | | | 140,488,485 | | | | 21.3 | |
Consumer Discretionary | | | 121,208,839 | | | | 18.4 | |
Industrials | | | 78,742,242 | | | | 12.0 | |
Utilities | | | 43,551,947 | | | | 6.6 | |
Materials | | | 26,050,940 | | | | 4.0 | |
Health Care | | | 21,039,387 | | | | 3.2 | |
Consumer Staples | | | 17,054,740 | | | | 2.6 | |
Energy | | | 13,137,438 | | | | 2.0 | |
Short-Term Investments | | | 10,857,936 | | | | 1.6 | |
| | | | | | | | |
Total Investments | | $ | 658,631,029 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
5
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SMALL/MID CAP VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.3% | | | | | | | | |
| | | | | | | | |
FINANCIALS–28.3% | | | | | | | | |
BANKS–9.0% | | | | | | | | |
Associated Banc-Corp | | | 260,530 | | | $ | 4,853,674 | |
Comerica, Inc. | | | 140,400 | | | | 6,576,336 | |
First Niagara Financial Group, Inc. | | | 559,700 | | | | 4,718,271 | |
Huntington Bancshares, Inc./OH | | | 841,300 | | | | 8,850,476 | |
Popular, Inc.(a) | | | 240,840 | | | | 8,200,602 | |
Susquehanna Bancshares, Inc. | | | 623,814 | | | | 8,377,822 | |
Synovus Financial Corp. | | | 197,140 | | | | 5,340,522 | |
Webster Financial Corp. | | | 162,850 | | | | 5,297,510 | |
Zions Bancorporation | | | 254,470 | | | | 7,254,940 | |
| | | | | | | | |
| | | | | | | 59,470,153 | |
| | | | | | | | |
CAPITAL MARKETS–1.1% | | | | | | | | |
E*TRADE Financial Corp.(a) | | | 282,220 | | | | 6,845,246 | |
| | | | | | | | |
CONSUMER FINANCE–1.3% | | | | | | | | |
SLM Corp. | | | 818,700 | | | | 8,342,553 | |
| | | | | | | | |
INSURANCE–8.7% | | | | | | | | |
American Financial Group, Inc./OH | | | 155,380 | | | | 9,434,674 | |
Aspen Insurance Holdings Ltd. | | | 202,850 | | | | 8,878,745 | |
Assurant, Inc. | | | 71,860 | | | | 4,917,380 | |
CNO Financial Group, Inc. | | | 497,970 | | | | 8,575,043 | |
Hanover Insurance Group, Inc. (The) | | | 125,260 | | | | 8,933,543 | |
PartnerRe Ltd. | | | 70,355 | | | | 8,029,616 | |
StanCorp Financial Group, Inc. | | | 14,906 | | | | 1,041,333 | |
Validus Holdings Ltd. | | | 185,832 | | | | 7,723,178 | |
| | | | | | | | |
| | | | | | | 57,533,512 | |
| | | | | | | | |
REAL ESTATE INVESTMENT TRUSTS (REITS)–7.3% | | | | | | | | |
DDR Corp. | | | 337,710 | | | | 6,200,356 | |
DiamondRock Hospitality Co. | | | 587,830 | | | | 8,741,032 | |
LTC Properties, Inc. | | | 195,280 | | | | 8,430,238 | |
Medical Properties Trust, Inc. | | | 527,900 | | | | 7,274,462 | |
Mid-America Apartment Communities, Inc. | | | 76,380 | | | | 5,704,058 | |
Parkway Properties, Inc./Md | | | 323,990 | | | | 5,958,176 | |
STAG Industrial, Inc. | | | 237,790 | | | | 5,825,855 | |
| | | | | | | | |
| | | | | | | 48,134,177 | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–0.9% | | | | | | | | |
Essent Group Ltd.(a) | | | 240,118 | | | | 6,173,434 | |
| | | | | | | | |
| | | | | | | 186,499,075 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–21.3% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–2.8% | | | | | | | | |
Brocade Communications Systems, Inc. | | | 553,960 | | | | 6,558,886 | |
Finisar Corp.(a)(b) | | | 229,590 | | | | 4,456,342 | |
Harris Corp. | | | 102,980 | | | | 7,396,024 | |
| | | | | | | | |
| | | | | | | 18,411,252 | |
| | | | | | | | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–8.4% | | | | | | | | |
Anixter International, Inc.(a) | | | 55,960 | | | $ | 4,950,222 | |
Arrow Electronics, Inc.(a) | | | 156,290 | | | | 9,047,628 | |
Avnet, Inc. | | | 207,550 | | | | 8,928,801 | |
CDW Corp./DE | | | 215,460 | | | | 7,577,728 | |
Insight Enterprises, Inc.(a) | | | 270,944 | | | | 7,014,740 | |
Jabil Circuit, Inc. | | | 243,670 | | | | 5,319,316 | |
TTM Technologies, Inc.(a) | | | 502,692 | | | | 3,785,271 | |
Vishay Intertechnology, Inc. | | | 628,210 | | | | 8,889,172 | |
| | | | | | | | |
| | | | | | | 55,512,878 | |
| | | | | | | | |
IT SERVICES–3.5% | | | | | | | | |
Amdocs Ltd. | | | 161,700 | | | | 7,544,113 | |
Booz Allen Hamilton Holding Corp. | | | 319,260 | | | | 8,469,968 | |
Convergys Corp. | | | 27,777 | | | | 565,817 | |
Genpact Ltd.(a) | | | 353,950 | | | | 6,700,274 | |
| | | | | | | | |
| | | | | | | 23,280,172 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–3.8% | | | | | | | | |
Advanced Micro Devices, Inc.(a)(b) | | | 931,280 | | | | 2,486,518 | |
Entegris, Inc.(a) | | | 107,497 | | | | 1,420,035 | |
Fairchild Semiconductor International, Inc.(a) | | | 306,590 | | | | 5,175,239 | |
Lam Research Corp. | | | 114,510 | | | | 9,085,223 | |
Teradyne, Inc. | | | 346,840 | | | | 6,863,964 | |
| | | | | | | | |
| | | | | | | 25,030,979 | |
| | | | | | | | |
SOFTWARE–1.5% | | | | | | | | |
Electronic Arts, Inc.(a) | | | 210,080 | | | | 9,876,911 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–1.3% | | | | | | | | |
NCR Corp.(a) | | | 287,450 | | | | 8,376,293 | |
| | | | | | | | |
| | | | | | | 140,488,485 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–18.4% | | | | | | | | |
AUTO COMPONENTS–3.7% | | | | | | | | |
Dana Holding Corp. | | | 325,470 | | | | 7,075,718 | |
Lear Corp. | | | 85,390 | | | | 8,375,051 | |
Tenneco, Inc.(a) | | | 159,370 | | | | 9,021,936 | |
| | | | | | | | |
| | | | | | | 24,472,705 | |
| | | | | | | | |
AUTOMOBILES–1.0% | | | | | | | | |
Thor Industries, Inc. | | | 112,960 | | | | 6,311,075 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–1.7% | | | | | | | | |
Bloomin’ Brands, Inc.(a) | | | 449,149 | | | | 11,120,929 | |
| | | | | | | | |
HOUSEHOLD DURABLES–3.1% | | | | | | | | |
Helen of Troy Ltd.(a) | | | 97,590 | | | | 6,349,205 | |
Meritage Homes Corp.(a) | | | 212,780 | | | | 7,657,952 | |
PulteGroup, Inc. | | | 310,830 | | | | 6,670,412 | |
| | | | | | | | |
| | | | | | | 20,677,569 | |
| | | | | | | | |
6
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MULTILINE RETAIL–2.3% | | | | | | | | |
Big Lots, Inc. | | | 188,120 | | | $ | 7,528,563 | |
Dillard’s, Inc.–Class A | | | 58,030 | | | | 7,264,195 | |
| | | | | | | | |
| | | | | | | 14,792,758 | |
| | | | | | | | |
SPECIALTY RETAIL–5.8% | | | | | | | | |
Brown Shoe Co., Inc. | | | 209,980 | | | | 6,750,857 | |
Children’s Place, Inc. (The) | | | 143,109 | | | | 8,157,213 | |
GameStop Corp.–Class A(b) | | | 163,680 | | | | 5,532,384 | |
Office Depot, Inc.(a) | | | 1,431,160 | | | | 12,272,197 | |
Pier 1 Imports, Inc. | | | 373,260 | | | | 5,748,204 | |
| | | | | | | | |
| | | | | | | 38,460,855 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–0.8% | | | | | | | | |
Crocs, Inc.(a) | | | 430,180 | | | | 5,372,948 | |
| | | | | | | | |
| | | | | | | 121,208,839 | |
| | | | | | | | |
INDUSTRIALS–11.9% | | | | | | | | |
AEROSPACE & DEFENSE–1.5% | | | | | | | | |
Spirit Aerosystems Holdings, Inc.–Class A(a) | | | 229,110 | | | | 9,860,895 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–3.7% | | | | | | | | |
AECOM Technology Corp.(a) | | | 323,285 | | | | 9,818,166 | |
Granite Construction, Inc. | | | 178,460 | | | | 6,785,049 | |
Tutor Perini Corp.(a) | | | 322,260 | | | | 7,756,798 | |
| | | | | | | | |
| | | | | | | 24,360,013 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–1.6% | | | | | | | | |
General Cable Corp. | | | 230,130 | | | | 3,428,937 | |
Regal-Beloit Corp. | | | 96,480 | | | | 7,255,296 | |
| | | | | | | | |
| | | | | | | 10,684,233 | |
| | | | | | | | |
MACHINERY–2.1% | | | | | | | | |
ITT Corp. | | | 164,110 | | | | 6,639,890 | |
Oshkosh Corp. | | | 46,634 | | | | 2,268,744 | |
Terex Corp. | | | 167,270 | | | | 4,663,488 | |
| | | | | | | | |
| | | | | | | 13,572,122 | |
| | | | | | | | |
ROAD & RAIL–1.8% | | | | | | | | |
Con-way, Inc. | | | 89,370 | | | | 4,395,217 | |
Ryder System, Inc. | | | 82,930 | | | | 7,700,050 | |
| | | | | | | | |
| | | | | | | 12,095,267 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–1.2% | | | | | | | | |
WESCO International, Inc.(a) | | | 107,200 | | | | 8,169,712 | |
| | | | | | | | |
| | | | | | | 78,742,242 | |
| | | | | | | | |
UTILITIES–6.6% | | | | | | | | |
ELECTRIC UTILITIES–2.8% | | | | | | | | |
PNM Resources, Inc. | | | 322,000 | | | | 9,540,860 | |
Westar Energy, Inc. | | | 218,085 | | | | 8,993,825 | |
| | | | | | | | |
| | | | | | | 18,534,685 | |
| | | | | | | | |
| | | | | | | | |
GAS UTILITIES–3.8% | | | | | | | | |
Atmos Energy Corp. | | | 137,550 | | | $ | 7,667,037 | |
Southwest Gas Corp. | | | 151,530 | | | | 9,366,069 | |
UGI Corp. | | | 210,220 | | | | 7,984,156 | |
| | | | | | | | |
| | | | | | | 25,017,262 | |
| | | | | | | | |
| | | | | | | 43,551,947 | |
| | | | | | | | |
MATERIALS–4.0% | | | | | | | | |
CHEMICALS–1.4% | | | | | | | | |
A Schulman, Inc. | | | 135,490 | | | | 5,491,409 | |
Huntsman Corp. | | | 153,650 | | | | 3,500,147 | |
| | | | | | | | |
| | | | | | | 8,991,556 | |
| | | | | | | | |
CONTAINERS & PACKAGING–1.8% | | | | | | | | |
Avery Dennison Corp. | | | 130,130 | | | | 6,751,145 | |
Graphic Packaging Holding Co.(a) | | | 369,220 | | | | 5,028,776 | |
| | | | | | | | |
| | | | | | | 11,779,921 | |
| | | | | | | | |
METALS & MINING–0.8% | | | | | | | | |
Steel Dynamics, Inc. | | | 267,450 | | | | 5,279,463 | |
| | | | | | | | |
| | | | | | | 26,050,940 | |
| | | | | | | | |
HEALTH CARE–3.2% | | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–3.2% | | | | | | | | |
LifePoint Hospitals, Inc.(a) | | | 105,965 | | | | 7,619,943 | |
Molina Healthcare, Inc.(a) | | | 90,050 | | | | 4,820,377 | |
WellCare Health Plans, Inc.(a) | | | 104,790 | | | | 8,599,067 | |
| | | | | | | | |
| | | | | | | 21,039,387 | |
| | | | | | | | |
CONSUMER STAPLES–2.6% | | | | | | | | |
FOOD PRODUCTS–2.6% | | | | | | | | |
Dean Foods Co. | | | 581,020 | | | | 11,260,168 | |
Ingredion, Inc. | | | 68,300 | | | | 5,794,572 | |
| | | | | | | | |
| | | | | | | 17,054,740 | |
| | | | | | | | |
ENERGY–2.0% | | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–2.0% | | | | | | | | |
Bill Barrett Corp.(a) | | | 380,720 | | | | 4,336,401 | |
Rosetta Resources, Inc.(a) | | | 221,060 | | | | 4,931,849 | |
SM Energy Co. | | | 100,290 | | | | 3,869,188 | |
| | | | | | | | |
| | | | | | | 13,137,438 | |
| | | | | | | | |
Total Common Stocks (cost $533,563,594) | | | | | | | 647,773,093 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–1.6% | | | | | | | | |
TIME DEPOSIT–1.6% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $10,857,936) | | $ | 10,858 | | | | 10,857,936 | |
| | | | | | | | |
7
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–99.9% (cost $544,421,530) | | | | | | $ | 658,631,029 | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.4% | | | | | | | | |
INVESTMENT COMPANIES–1.4% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(c)(d) (cost $9,098,900) | | | 9,098,900 | | | | 9,098,900 | |
| | | | | | | | |
TOTAL INVESTMENTS–101.3%
| | | | | | | | |
(cost $553,520,430) | | | | | | | 667,729,929 | |
Other assets less liabilities–(1.3)% | | | | | | | (8,672,086 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 659,057,843 | |
| | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
(d) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
See notes to financial statements.
8
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $544,421,530) | | $ | 658,631,029 | (a) |
Affiliated issuers (cost $9,098,900—investment of cash collateral for securities loaned) | | | 9,098,900 | |
Receivable for investment securities sold | | | 2,456,909 | |
Dividends and interest receivable | | | 791,724 | |
Receivable for capital stock sold | | | 121,099 | |
| | | | |
Total assets | | | 671,099,661 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 9,098,900 | |
Payable for capital stock redeemed | | | 1,146,737 | |
Payable for investment securities purchased | | | 1,143,845 | |
Advisory fee payable | | | 414,518 | |
Distribution fee payable | | | 93,797 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 131,599 | |
| | | | |
Total liabilities | | | 12,041,818 | |
| | | | |
NET ASSETS | | $ | 659,057,843 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 30,173 | |
Additional paid-in capital | | | 441,725,017 | |
Undistributed net investment income | | | 4,069,933 | |
Accumulated net realized gain on investment transactions | | | 99,023,221 | |
Net unrealized appreciation on investments | | | 114,209,499 | |
| | | | |
| | $ | 659,057,843 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 211,679,812 | | | | 9,643,456 | | | $ | 21.95 | |
B | | $ | 447,378,031 | | | | 20,529,652 | | | $ | 21.79 | |
(a) | | Includes securities on loan with a value of $8,843,827 (see Note E). |
See notes to financial statements.
9
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers | | $ | 10,226,536 | |
Affiliated issuers | | | 4,241 | |
Interest | | | 771 | |
Securities lending income | | | 166,369 | |
| | | | |
| | | 10,397,917 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 4,992,339 | |
Distribution fee—Class B | | | 1,130,137 | |
Transfer agency—Class A | | | 2,761 | |
Transfer agency—Class B | | | 5,840 | |
Custodian | | | 140,409 | |
Printing | | | 136,892 | |
Audit and tax | | | 51,232 | |
Legal | | | 50,480 | |
Administrative | | | 48,434 | |
Directors’ fees | | | 4,503 | |
Miscellaneous | | | 21,186 | |
| | | | |
Total expenses | | | 6,584,213 | |
| | | | |
Net investment income | | | 3,813,704 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 101,341,097 | |
Net change in unrealized appreciation/depreciation of investments | | | (47,350,031 | ) |
| | | | |
Net gain on investment transactions | | | 53,991,006 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 57,804,770 | |
| | | | |
See notes to financial statements.
10
| | |
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
STATEMENTOF CHANGESIN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 3,813,704 | | | $ | 3,572,380 | |
Net realized gain on investment transactions | | | 101,341,097 | | | | 76,474,917 | |
Net change in unrealized appreciation/depreciation of investments | | | (47,350,031 | ) | | | 108,998,800 | |
| | | | | | | | |
Net increase in net assets from operations | | | 57,804,770 | | | | 189,046,097 | |
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (1,452,999 | ) | | | (1,173,072 | ) |
Class B | | | (2,092,707 | ) | | | (1,768,157 | ) |
Net realized gain on investment transactions | | | | | | | | |
Class A | | | (23,966,237 | ) | | | (10,888,972 | ) |
Class B | | | (51,622,589 | ) | | | (24,158,193 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase (decrease) | | | (9,435,791 | ) | | | 34,149,805 | |
| | | | | | | | |
Total increase (decrease) | | | (30,765,553 | ) | | | 185,207,508 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 689,823,396 | | | | 504,615,888 | |
| | | | | | | | |
End of period (including undistributed net investment income of $4,069,933 and $3,816,816, respectively) | | $ | 659,057,843 | | | $ | 689,823,396 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
SMALL/MID CAP VALUE PORTFOLIO |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Small/Mid Cap Value Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
12
| | |
| | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 647,773,093 | | | $ | –0 | – | | $ | –0 | – | | $ | 647,773,093 | |
Short-Term Investments | | | –0 | – | | | 10,857,936 | | | | –0 | – | | | 10,857,936 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 9,098,900 | | | | –0 | – | | | –0 | – | | | 9,098,900 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 656,871,993 | | | | 10,857,936 | | | | –0 | – | | | 667,729,929 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 656,871,993 | | | $ | 10,857,936 | | | $ | –0 | – | | $ | 667,729,929 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair
13
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
14
| | |
| | AllianceBernstein Variable Products Series Fund |
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion, .65% of the next $2.5 billion and .60% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2014, there were no expenses waived by the Adviser.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,434.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $826,048, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 297,007,006 | | | $ | 385,378,095 | |
15
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 555,092,828 | |
| | | | |
Gross unrealized appreciation | | | 136,945,425 | |
Gross unrealized depreciation | | | (24,308,324 | ) |
| | | | |
Net unrealized appreciation | | $ | 112,637,101 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $8,843,827 and had received cash collateral which has been invested into AB Exchange Reserves of $9,098,900. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $166,369 and $4,241 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 9,820 | | | $ | 95,621 | | | $ | 96,342 | | | $ | 9,099 | |
16
| | |
| | AllianceBernstein Variable Products Series Fund |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,246,289 | | | | 2,218,096 | | | | | $ | 28,041,665 | | | $ | 45,752,106 | |
Shares issued in reinvestment of dividends and distributions | | | 1,203,562 | | | | 588,680 | | | | | | 25,419,235 | | | | 12,062,044 | |
Shares redeemed | | | (2,294,010 | ) | | | (2,193,629 | ) | | | | | (53,028,466 | ) | | | (44,891,426 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase | | | 155,841 | | | | 613,147 | | | | | $ | 432,434 | | | $ | 12,922,724 | |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,725,536 | | | | 4,088,375 | | | | | $ | 38,451,925 | | | $ | 85,041,955 | |
Shares issued in reinvestment of dividends and distributions | | | 2,559,090 | | | | 1,272,146 | | | | | | 53,715,296 | | | | 25,926,350 | |
Shares redeemed | | | (4,538,703 | ) | | | (4,364,028 | ) | | | | | (102,035,446 | ) | | | (89,741,224 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (254,077 | ) | | | 996,493 | | | | | $ | (9,868,225 | ) | | $ | 21,227,081 | |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
17
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 14,929,994 | | | $ | 15,132,800 | |
Net long-term capital gains | | | 64,204,538 | | | | 22,855,594 | |
| | | | | | | | |
Total taxable distributions | | $ | 79,134,532 | | | $ | 37,988,394 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 9,996,752 | |
Undistributed net capital gain | | | 94,668,801 | |
Unrealized appreciation/(depreciation) | | | 112,637,101 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 217,302,654 | |
| | | | |
(a) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2014, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to return of capital distributions received from underlying securities resulted in a net decrease in undistributed net investment income and a net increase in accumulated net realized gain on investment transactions. These reclassifications had no effect on net assets.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
18
| | |
| | |
SMALL/MID CAP VALUE PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $22.89 | | | | $17.67 | | | | $15.46 | | | | $16.95 | | | | $13.41 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .17 | | | | .16 | | | | .13 | | | | .09 | | | | .08 | |
Net realized and unrealized gain (loss) on investment transactions | | | 1.82 | | | | 6.41 | | | | 2.72 | | | | (1.50 | ) | | | 3.52 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 1.99 | | | | 6.57 | | | | 2.85 | | | | (1.41 | ) | | | 3.60 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.17 | ) | | | (.13 | ) | | | (.10 | ) | | | (.08 | ) | | | (.06 | ) |
Distributions from net realized gain on investment transactions | | | (2.76 | ) | | | (1.22 | ) | | | (.54 | ) | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (2.93 | ) | | | (1.35 | ) | | | (.64 | ) | | | (.08 | ) | | | (.06 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $21.95 | | | | $22.89 | | | | $17.67 | | | | $15.46 | | | | $16.95 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 9.20 | % | | | 38.06 | %* | | | 18.75 | % | | | (8.39 | )% | | | 26.91 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $211,680 | | | | $217,146 | | | | $156,832 | | | | $151,754 | | | | $174,068 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .82 | % | | | .81 | % | | | .82 | % | | | .83 | % | | | .84 | %+ |
Net investment income | | | .75 | % | | | .77 | % | | | .75 | % | | | .56 | % | | | .56 | %+ |
Portfolio turnover rate | | | 45 | % | | | 56 | % | | | 50 | % | | | 70 | % | | | 54 | % |
See footnote summary on page 20.
19
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SMALL/MID CAP VALUE PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $22.74 | | | | $17.58 | | | | $15.38 | | | | $16.87 | | | | $13.36 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .11 | | | | .11 | | | | .08 | | | | .05 | | | | .05 | |
Net realized and unrealized gain (loss) on investment transactions | | | 1.81 | | | | 6.36 | | | | 2.71 | | | | (1.50 | ) | | | 3.50 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 1.92 | | | | 6.47 | | | | 2.79 | | | | (1.45 | ) | | | 3.55 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.11 | ) | | | (.09 | ) | | | (.05 | ) | | | (.04 | ) | | | (.04 | ) |
Distributions from net realized gain on investment transactions | | | (2.76 | ) | | | (1.22 | ) | | | (.54 | ) | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (2.87 | ) | | | (1.31 | ) | | | (.59 | ) | | | (.04 | ) | | | (.04 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $21.79 | | | | $22.74 | | | | $17.58 | | | | $15.38 | | | | $16.87 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 8.95 | % | | | 37.63 | %* | | | 18.47 | % | | | (8.62 | )% | | | 26.59 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $447,378 | | | | $472,677 | | | | $347,784 | | | | $324,145 | | | | $378,436 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.07 | % | | | 1.06 | % | | | 1.07 | % | | | 1.08 | % | | | 1.09 | %+ |
Net investment income | | | .49 | % | | | .51 | % | | | .51 | % | | | .31 | % | | | .31 | %+ |
Portfolio turnover rate | | | 45 | % | | | 56 | % | | | 50 | % | | | 70 | % | | | 54 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from the class action settlements, which enhanced the Portfolio’s performance for the year ended December 31, 2013 by 0.01%. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
20
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| | |
REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Small/Mid Cap Value Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Small/Mid Cap Value Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Small/Mid Cap Value Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
21
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| | |
| | |
2014 TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 42.89% of dividends paid qualify for the dividends received deduction.
22
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| | |
| | |
SMALL/MID CAP VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
| | |
BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Joseph G. Paul(2), Vice President James W. MacGregor(2), Vice President Shri Singhvi(2) , Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
| | |
| | |
CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company State Street Corporation CCB/5 1 Iron Street Boston, MA 02210 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
DISTRIBUTOR AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 | | |
(1) | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the Small/Mid-Cap Value Senior Investment Management Team. Mr. Joseph G. Paul, Mr. James W. MacGregor, and Mr. Shri Singhvi are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
23
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| | |
SMALL/MID CAP VALUE PORTFOLIO |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
| | | | | | | | |
DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003–2006, and interim CEO 1999–2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007 and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014 |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999–June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989–May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
| | | | | | | | |
24
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
| | | | | | | | |
25
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SMALL/MID CAP VALUE PORTFOLIO |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
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| | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Joseph G. Paul 55 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
James W. MacGregor 47 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Shri Singhvi 41 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI **, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABIS and ABI are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618 or visit www.abglobal.com for a free prospectus or SAI. |
27
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SMALL/MID CAP VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Small/Mid Cap Value Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F.2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 3/31/14 ($MIL) |
Small/Mid Cap Value Portfolio | | Specialty | | 0.75% on first $2.5 billion
0.65% on next $2.5 billion 0.60% on the balance | | $691.8 |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $55,161 (0.009% of the Portfolio’s average daily net assets) for such services.
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
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| | AllianceBernstein Variable Products Series Fund |
The Adviser has agreed to waive that portion of its management fees and/or reimburse the Portfolio for that portion of its total operating expenses to the degree necessary to limit the Portfolio’s expense ratios to the amounts set forth below for the Portfolio’s fiscal year. The waiver is terminable by the Adviser upon at least 60 days’ notice prior to the Portfolio’s prospectus update. The Portfolio was operating below its expense caps for the most recent fiscal year; accordingly the expense limitation undertaking of the Portfolio was of no effect. In addition, set forth below are the gross expense ratios of the Portfolio for the most recently completed fiscal year:
| | | | | | | | |
Portfolio | | Expense Cap Pursuant to Expense Limitation Undertaking | | Gross Expense Ratio | | | Fiscal Year End |
Small/Mid Cap Value Portfolio | | Class A 1.20% | | | 0.81% | | | December 31 |
| | Class B 1.45% | | | 1.06% | | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similarities and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
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SMALL/MID CAP VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($MIL) | | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Small/Mid Cap Value Portfolio | | $ | 691.8 | | | Small & Mid Cap Value Schedule
0.95% on first $25m 0.75% on the next $25m 0.65% on the next $50m 0.55% on the balance Minimum account size $25m | | | 0.579 | % | | | 0.750 | % |
The Adviser also manages AllianceBernstein Trust, Inc.—Discovery Value Fund (“Discovery Value Fund”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Discovery Value Fund, and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Small/Mid Cap Value Portfolio | | Discovery Value Fund | | 0.75% on first $2.5 billion 0.65% on next $2.5 billion 0.60% on the balance | | | 0.750% | | | | 0.750% | |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families that have an investment style similar to that of the Portfolio. The Adviser charges the fees set forth below for the sub-advisory relationships that have a somewhat similar investment style as the Portfolio. Also shown are the Portfolio’s advisory fee and what would have been the effective advisory fees of the Portfolio had the fee schedules of the sub-advisory relationships been applicable to the Portfolio based on March 31, 2014 net assets.
| | | | | | | | | | | | |
Portfolio | | | | Fee Schedule | | Effective Sub-Adv. Fee | | | Portfolio Advisory Fee | |
Small/Mid Cap Value Portfolio | | Client #1 | | 0.50% on the first $250 million 0.40% on the balance | | | 0.468% | | | | 0.750% | |
| | | | |
| | Client #2 | | 0.95% on the first $10 million 0.75% on the next $40 million 0.65% on the next $50 million 0.55% on the balance | | | 0.575% | | | | 0.750% | |
| | | | |
| | Client #3 | | 0.61% on the first $150 million 0.50% on the balance | | | 0.524% | | | | 0.750% | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser.
While it appears that the sub-advisory relationships are paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such lower fees due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationships. There could be various business reasons why an investment adviser would be willing to provide a sub-advisory relationship investment related services at a different feel level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management generally required by a registered investment company.
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
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| | AllianceBernstein Variable Products Series Fund |
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Lipper, Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser, compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.7 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.8,9
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)10 | | | Lipper EG Median (%) | | | Lipper EG Rank |
Small/Mid Cap Value Portfolio | | | 0.750 | | | | 0.801 | | | 4/10 |
Lipper also analyzed the Portfolio’s most recently completed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.11
| | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)12 | | | Lipper EG Median (%) | | | Lipper EG Rank | | Lipper EU Median (%) | | | Lipper EU Rank |
Small/Mid Cap Value Portfolio | | | 0.814 | | | | 0.870 | | | 3/10 | | | 0.880 | | | 5/15 |
Based on this analysis, the Portfolio has a more favorable ranking on a total expense ratio basis than on a contractual management fee basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to
7 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
8 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
9 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level. The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1” would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
10 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. In addition, the contractual management fee does not reflect any advisory fee waiver or expense cap that would effectively reduce the actual management fee. |
11 | | Except for asset size comparability, Lipper uses the same criteria for selecting an EG peer when selecting an EU peer. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund |
12 | | Most recently completed fiscal year end Class A total expense ratio. |
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SMALL/MID CAP VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $1,036,624 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $2,374,250 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.13
The Portfolio did not effect brokerage transactions and pay commissions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) nor its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted in the future with the Portfolio would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economies of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
13 | | The Fund, which includes the Portfolio and other Portfolios of the Fund paid ABIS a flat fee of $18,000 in 2013. |
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| | AllianceBernstein Variable Products Series Fund |
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.14,15 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.16 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio17 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)18 for the periods ended February 28, 2014.19
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Small/Mid Cap Value Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 27.86 | | | | 26.99 | | | | 26.99 | | | | 4/10 | | | | 8/22 | |
3 year | | | 12.83 | | | | 13.31 | | | | 13.27 | | | | 6/10 | | | | 12/21 | |
5 year | | | 28.43 | | | | 25.95 | | | | 27.30 | | | | 2/10 | | | | 6/20 | |
10 year | | | 9.62 | | | | 9.75 | | | | 9.69 | | | | 5/7 | | | | 7/12 | |
14 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the last four years. |
15 | | As mentioned previously, the Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
16 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economies of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
17 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
18 | | The Portfolio’s PG is identical to the Portfolio’s respective EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
19 | | Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
33
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SMALL/MID CAP VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Set forth below are the 1, 3, 5, 10 year and since inception performance returns of the Portfolio (in bold)20 versus its benchmarks.21 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.22
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | Volatility (%) | | | Sharpe (%) | | |
Small/Mid Cap Value Portfolio | | | 27.86 | | | | 12.83 | | | | 28.43 | | | | 9.62 | | | | 11.19 | | | | 20.09 | | | | 0.48 | | | | 10 | |
Russell 2500 Value Index | | | 25.52 | | | | 13.98 | | | | 26.57 | | | | 8.95 | | | | 10.02 | | | | 18.46 | | | | 0.47 | | | | 10 | |
Russell 2500 Index | | | 29.97 | | | | 14.94 | | | | 27.63 | | | | 9.53 | | | | 9.33 | | | | N/A | | | | N/A | | | | N/A | |
Inception Date: May 2, 2001 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
20 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
21 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 22, 2014. |
22 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
34
VPS-SMCV-0151-1214
DEC 12.31.14
ANNUAL REPORT
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
Investment Products Offered
| Ø | | Are Not Bank Guaranteed |
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the Adviser of the funds.
You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Simply visit AB’s website at www.abglobal.com or go to the Securities and Exchange Commission’s (the “Commission”) website at www.sec.gov, or call AB at (800) 227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered trademark used by permission of the owner, AllianceBernstein L.P.
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VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
LETTER TO INVESTORS
February 10, 2015
The following is an update of AllianceBernstein Variable Products Series Fund—Value Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2014.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in a diversified portfolio of equity securities of U.S. companies, generally representing approximately 90-150 companies, with relatively large market capitalizations that AllianceBernstein L.P. (the “Adviser”) believes are undervalued. The Portfolio invests in companies that are determined by the Adviser to be undervalued using the fundamental value approach of the Adviser. The fundamental value approach seeks to identify a universe of securities that are considered to be undervalued because they are attractively priced relative to their future earnings power and dividend-paying capability.
The Portfolio may enter into derivatives transactions, such as options, futures, forwards and swaps. The Portfolio may use options strategies involving the purchase and/or writing of various combinations of call and/or put options, including on individual securities and stock indices, futures contracts (including futures contracts on individual securities and stock indices) or shares of exchange-traded funds (“ETFs”). These transactions may be used, for example, to earn extra income, to adjust exposure to individual securities or markets, or to protect all or a portion of the Portfolio’s portfolio from a decline in value, sometimes within certain ranges.
The Portfolio may invest in securities of non-U.S. issuers.
The Portfolio may, at times, invest in shares of ETFs in lieu of making direct investments in equity securities. ETFs may provide more efficient and economical exposure to the type of companies and geographic locations in which the Portfolio seeks to invest than direct investments.
INVESTMENT RESULTS
The table on page 3 shows the Portfolio’s performance compared to its benchmark, the Russell 1000 Value Index, and the broad U.S. stock market, as represented by the Standard and Poor’s (“S&P”) 500 Index, for the one-, five- and 10-year periods ended December 31, 2014.
All share classes of the Portfolio underperformed the benchmark and the S&P 500 Index for the annual period. Security selection drove the underperformance, with particular weakness in the consumer growth, financial and capital equipment sectors. Sector selection also had a negative impact on returns, due to an overweight in energy and the Portfolio’s cash position. Security selection in the consumer cyclicals and services sector was positive, which helped to offset some of these losses.
The Portfolio did not utilize derivatives during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equity markets rose in the annual period. U.S. large-cap stocks led the gains in 2014, as a resilient economic recovery fueled earnings growth. Investors favored defensive stocks, while resources stocks fell as plunging oil prices dragged down shares of energy companies. Global economic growth continued at a slow and uneven pace. In the U.S., manufacturing indicators rose, and unemployment fell from 6.6% at the beginning of 2014 to 5.8% in November, bolstering consumer confidence and increasing the chances of a U.S. Federal Reserve rate hike in 2015. In contrast, the euro zone economy stalled. In Europe, the Central Bank lowered its 2014 eurozone growth forecast as inflation fell to its lowest level since 2009, and business activity remained weak. Renewed political turmoil in Greece and the prospect that the country would exit the European Union also weighed on investors. In Japan, gross domestic product has risen by only 0.3% over the six quarters since the Bank of Japan’s aggressive stimulus program began in April 2013, raising concerns that prime minister Shinzo Abe’s plan isn’t working. In emerging markets, Russia was hit by a perfect storm of sanctions and lower oil prices, prompting a sharp depreciation in the ruble.
The Portfolio has remained focused on attractively-valued opportunities, which are widespread across most industry sectors and regions. The U.S. Value Senior Investment Management Team prefers companies with robust cash flow generation and strong balance sheets, whose stocks are trading at deep valuation discounts.
1
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VALUE PORTFOLIO | | |
DISCLOSURESAND RISKS | | AllianceBernstein Variable Products Series Fund |
Benchmark Disclosure
The unmanaged Russell 1000® Value Index and the unmanaged S&P 500® Index do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Value Index represents the performance of 1,000 large-cap companies within the U.S. The S&P 500 Index includes 500 U.S. stocks and is a common representation of the performance of the overall U.S. stock market. An investor cannot invest directly in an index, and its results are not indicative of the performance for any specific investment, including the Portfolio.
A Word About Risk
Market Risk: The value of the Portfolio’s assets will fluctuate as the stock or bond market fluctuates. The value of its investments may decline, sometimes rapidly and unpredictably, simply because of economic changes or other events that affect large portions of the market. It includes the risk that a particular style of investing, such as value, may underperform the market generally.
Foreign (Non-U.S.) Risk: Investments in securities of non-U.S. issuers may involve more risk than those of U.S. issuers. These securities may fluctuate more widely in price and may be less liquid due to adverse market, economic, political, regulatory or other factors.
Currency Risk: Fluctuations in currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce its returns.
Derivatives Risk: Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and may be subject to counterparty risk to a greater degree than more traditional investments.
Management Risk: The Portfolio is subject to management risk because it is an actively-managed investment fund. The Adviser will apply its investment techniques and risk analyses in making investment decisions for the Portfolio, but there is no guarantee that its techniques will produce the intended results.
These risks are fully discussed in the Variable Products prospectus.
An Important Note About Historical Performance
The investment return and principal value of an investment in the Portfolio will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance shown on the following page represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance information shown. Please contact your Financial Advisor or Insurance Agent Representative at your financial institution to obtain portfolio performance information current to the most recent month end.
Investors should consider the investment objectives, risks, charges and expenses of the Portfolio carefully before investing. For additional copies of the Portfolio’s prospectus or summary prospectus, which contains this and other information, call your financial advisor or 800.984.7654. Please read the prospectus and/or summary prospectus carefully before investing.
All fees and expenses related to the operation of the Portfolio have been deducted, but no adjustment has been made for insurance company separate account or annuity contract charges, which would reduce total return to a contract owner. Performance assumes reinvestment of distributions and does not account for taxes.
There are additional fees and expenses associated with all Variable Products. These fees can include mortality and expense risk charges, administrative charges, and other charges that can significantly reduce investment returns. Those fees and expenses are not reflected in this annual report. You should consult your Variable Products prospectus for a description of those fees and expenses and speak to your insurance agent or financial representative if you have any questions. You should read the prospectus before investing or sending money.
2
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| | |
VALUE PORTFOLIO | | |
HISTORICAL PERFORMANCE | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARK | | NAV Returns | |
PERIODS ENDED DECEMBER 31, 2014 (unaudited) | | 1 Year | | | 5 Years* | | | 10 Years* | |
Value Portfolio Class A† | | | 11.10% | | | | 13.68% | | | | 5.30% | |
Value Portfolio Class B† | | | 10.77% | | | | 13.37% | | | | 5.05% | |
Russell 1000 Value Index | | | 13.45% | | | | 15.42% | | | | 7.30% | |
S&P 500 Index | | | 13.69% | | | | 15.45% | | | | 7.67% | |
* Average annual returns. † Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the performance of all share classes of the Portfolio for the annual period ended December 31, 2014 by 0.04%. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 0.73% and 0.98% for Class A and Class B shares, respectively. The Financial Highlights section of this report sets forth expense ratio data for the current reporting period; the expense ratios shown above may differ from the expense ratios in the Financial Highlights section since they are based on different time periods.
VALUE PORTFOLIO CLASS A
GROWTH OF A $10,000 INVESTMENT
12/31/04 – 12/31/14 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Value Portfolio Class A shares (from 12/31/04 to 12/31/14) as compared to the performance of the Portfolio’s benchmark, the Russell 1000 Value Index, and the broad U.S. stock market, as represented by the S&P 500 Index. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note about Historical Performance on page 2.
3
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VALUE PORTFOLIO | | |
EXPENSE EXAMPLE (unaudited) | | AllianceBernstein Variable Products Series Fund |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds by comparing this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. The estimate of expenses does not include fees or other expenses of any variable insurance product. If such expenses were included, the estimate of expenses you paid during the period would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or contingent deferred sales charges on redemptions. Therefore, the second line of each classes’ table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | | | | | | | | | | | | | | | |
| | Beginning Account Value July 1, 2014 | | | Ending Account Value December 31, 2014 | | | Expenses Paid During Period* | | | Annualized Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,036.70 | | | $ | 4.11 | | | | 0.80 | % |
Hypothetical (5% annual return before expenses)* | | $ | 1,000 | | | $ | 1,021.17 | | | $ | 4.08 | | | | 0.80 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,035.10 | | | $ | 5.39 | | | | 1.05 | % |
Hypothetical (5% annual return before expenses)* | | $ | 1,000 | | | $ | 1,019.91 | | | $ | 5.35 | | | | 1.05 | % |
* | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
4
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VALUE PORTFOLIO | | |
TEN LARGEST HOLDINGS* | | |
December 31, 2014 (unaudited) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Exxon Mobil Corp. | | $ | 4,114,025 | | | | 3.6 | % |
Pfizer, Inc. | | | 3,635,205 | | | | 3.2 | |
Wells Fargo & Co. | | | 3,360,466 | | | | 2.9 | |
Bank of America Corp. | | | 3,313,800 | | | | 2.9 | |
Johnson & Johnson | | | 2,959,331 | | | | 2.6 | |
Hewlett-Packard Co. | | | 2,865,282 | | | | 2.5 | |
Microsoft Corp. | | | 2,617,597 | | | | 2.3 | |
AT&T, Inc. | | | 2,364,736 | | | | 2.1 | |
Capital One Financial Corp. | | | 2,360,930 | | | | 2.1 | |
JPMorgan Chase & Co. | | | 2,327,976 | | | | 2.0 | |
| | | | | | | | |
| | $ | 29,919,348 | | | | 26.2 | % |
SECTOR BREAKDOWN†
December 31, 2014 (unaudited)
| | | | | | | | |
SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 31,037,405 | | | | 26.8 | % |
Information Technology | | | 16,706,686 | | | | 14.4 | |
Health Care | | | 14,772,114 | | | | 12.8 | |
Energy | | | 13,638,759 | | | | 11.8 | |
Consumer Discretionary | | | 12,100,315 | | | | 10.5 | |
Utilities | | | 7,717,240 | | | | 6.7 | |
Industrials | | | 7,040,400 | | | | 6.1 | |
Consumer Staples | | | 4,720,662 | | | | 4.1 | |
Telecommunication Services | | | 3,618,147 | | | | 3.1 | |
Materials | | | 2,492,468 | | | | 2.1 | |
Short-Term Investments | | | 1,801,134 | | | | 1.6 | |
| | | | | | | | |
Total Investments | | $ | 115,645,330 | | | | 100.0 | % |
† | | The Portfolio’s sector breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. |
Please note: The sector classifications presented herein are based on the Global Industry Classification Standard (GICS) which was developed by Morgan Stanley Capital International and Standard & Poor’s. The components are divided into sector, industry group, and industry sub-indices as classified by the GICS for each of the market capitalization indices in the broad market. These sector classifications are broadly defined. The “Portfolio of Investments” section of the report reflects more specific industry information and is consistent with the investment restrictions discussed in the Portfolio’s prospectus.
5
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VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–99.7% | | | | | | | | |
| | | | | | | | |
FINANCIALS–27.2% | | | | | | | | |
BANKS–9.6% | | | | | | | | |
Bank of America Corp. | | | 185,232 | | | $ | 3,313,800 | |
Citigroup, Inc. | | | 15,100 | | | | 817,061 | |
Comerica, Inc. | | | 16,000 | | | | 749,440 | |
Fifth Third Bancorp | | | 19,800 | | | | 403,425 | |
JPMorgan Chase & Co. | | | 37,200 | | | | 2,327,976 | |
Wells Fargo & Co. | | | 61,300 | | | | 3,360,466 | |
| | | | | | | | |
| | | | | | | 10,972,168 | |
| | | | | | | | |
CAPITAL MARKETS–2.0% | | | | | | | | |
Bank of New York Mellon Corp. (The) | | | 13,500 | | | | 547,695 | |
Goldman Sachs Group, Inc. (The) | | | 2,977 | | | | 577,032 | |
Morgan Stanley | | | 15,717 | | | | 609,820 | |
State Street Corp. | | | 7,300 | | | | 573,050 | |
| | | | | | | | |
| | | | | | | 2,307,597 | |
| | | | | | | | |
CONSUMER FINANCE–4.5% | | | | | | | | |
Capital One Financial Corp. | | | 28,600 | | | | 2,360,930 | |
Discover Financial Services | | | 27,300 | | | | 1,787,877 | |
SLM Corp. | | | 92,700 | | | | 944,613 | |
| | | | | | | | |
| | | | | | | 5,093,420 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–1.1% | | | | | | | | |
Berkshire Hathaway, Inc.– Class B(a) | | | 8,100 | | | | 1,216,215 | |
| | | | | | | | |
INSURANCE–10.0% | | | | | | | | |
ACE Ltd. | | | 3,725 | | | | 427,928 | |
Allstate Corp. (The) | | | 32,200 | | | | 2,262,050 | |
American Financial Group, Inc./OH | | | 21,900 | | | | 1,329,768 | |
American International Group, Inc. | | | 33,900 | | | | 1,898,739 | |
Aon PLC | | | 12,533 | | | | 1,188,504 | |
Aspen Insurance Holdings Ltd. | | | 8,000 | | | | 350,160 | |
Assurant, Inc. | | | 4,859 | | | | 332,501 | |
Chubb Corp. (The) | | | 5,603 | | | | 579,743 | |
Hanover Insurance Group, Inc. (The) | | | 10,400 | | | | 741,728 | |
PartnerRe Ltd. | | | 10,627 | | | | 1,212,860 | |
Progressive Corp. (The) | | | 6,800 | | | | 183,532 | |
Travelers Cos., Inc. (The) | | | 7,600 | | | | 804,460 | |
Unum Group | | | 3,900 | �� | | | 136,032 | |
| | | | | | | | |
| | | | | | | 11,448,005 | |
| | | | | | | | |
| | | | | | | 31,037,405 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–14.6% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–2.8% | | | | | | | | |
Brocade Communications Systems, Inc. | | | 109,800 | | | | 1,300,032 | |
Cisco Systems, Inc. | | | 46,475 | | | | 1,292,702 | |
Harris Corp. | | | 9,171 | | | | 658,661 | |
| | | | | | | | |
| | | | | | | 3,251,395 | |
| | | | | | | | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.4% | | | | | | | | |
Arrow Electronics, Inc.(a) | | | 7,400 | | | $ | 428,386 | |
| | | | | | | | |
IT SERVICES–1.9% | | | | | | | | |
Booz Allen Hamilton Holding Corp. | | | 14,300 | | | | 379,379 | |
Xerox Corp. | | | 131,200 | | | | 1,818,432 | |
| | | | | | | | |
| | | | | | | 2,197,811 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–2.9% | | | | | | | | |
Applied Materials, Inc. | | | 39,800 | | | | 991,816 | |
Intel Corp. | | | 55,600 | | | | 2,017,724 | |
Micron Technology, Inc.(a) | | | 8,980 | | | | 314,390 | |
| | | | | | | | |
| | | | | | | 3,323,930 | |
| | | | | | | | |
SOFTWARE–4.1% | | | | | | | | |
Electronic Arts, Inc.(a) | | | 24,929 | | | | 1,172,037 | |
Microsoft Corp. | | | 56,353 | | | | 2,617,597 | |
Oracle Corp. | | | 18,907 | | | | 850,248 | |
| | | | | | | | |
| | | | | | | 4,639,882 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–2.5% | | | | | | | | |
Hewlett-Packard Co. | | | 71,400 | | | | 2,865,282 | |
| | | | | | | | |
| | | | | | | 16,706,686 | |
| | | | | | | | |
HEALTH CARE–12.9% | | | | | | | | |
BIOTECHNOLOGY–0.9% | | | | | | | | |
Gilead Sciences, Inc.(a) | | | 10,606 | | | | 999,721 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–5.1% | | | | | | | | |
Aetna, Inc. | | | 19,000 | | | | 1,687,770 | |
Anthem, Inc. | | | 17,800 | | | | 2,236,926 | |
Express Scripts Holding Co.(a) | | | 8,900 | | | | 753,563 | |
UnitedHealth Group, Inc. | | | 11,300 | | | | 1,142,317 | |
| | | | | | | | |
| | | | | | | 5,820,576 | |
| | | | | | | | |
PHARMACEUTICALS–6.9% | | | | | | | | |
Johnson & Johnson | | | 28,300 | | | | 2,959,331 | |
Merck & Co., Inc. | | | 23,900 | | | | 1,357,281 | |
Pfizer, Inc. | | | 116,700 | | | | 3,635,205 | |
| | | | | | | | |
| | | | | | | 7,951,817 | |
| | | | | | | | |
| | | | | | | 14,772,114 | |
| | | | | | | | |
ENERGY–11.9% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.2% | | | | | | | | |
National Oilwell Varco, Inc. | | | 4,445 | | | | 291,281 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–11.7% | | | | | | | | |
Chesapeake Energy Corp. | | | 8,500 | | | | 166,345 | |
Chevron Corp. | | | 15,700 | | | | 1,761,226 | |
Exxon Mobil Corp. | | | 44,500 | | | | 4,114,025 | |
Hess Corp. | | | 24,000 | | | | 1,771,680 | |
Marathon Oil Corp. | | | 8,200 | | | | 231,978 | |
6
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Marathon Petroleum Corp. | | | 10,552 | | | $ | 952,423 | |
Murphy Oil Corp. | | | 19,071 | | | | 963,467 | |
Occidental Petroleum Corp. | | | 24,200 | | | | 1,950,762 | |
SM Energy Co. | | | 900 | | | | 34,722 | |
Valero Energy Corp. | | | 28,300 | | | | 1,400,850 | |
| | | | | | | | |
| | | | | | | 13,347,478 | |
| | | | | | | | |
| | | | | | | 13,638,759 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–10.6% | | | | | | | | |
AUTO COMPONENTS–1.5% | | | | | | | | |
Lear Corp. | | | 7,300 | | | | 715,984 | |
Magna International, Inc. (New York)–Class A | | | 9,700 | | | | 1,054,293 | |
| | | | | | | | |
| | | | | | | 1,770,277 | |
| | | | | | | | |
AUTOMOBILES–1.6% | | | | | | | | |
Ford Motor Co. | | | 118,300 | | | | 1,833,650 | |
| | | | | | | | |
HOUSEHOLD DURABLES–0.3% | | | | | | | | |
PulteGroup, Inc. | | | 18,192 | | | | 390,400 | |
| | | | | | | | |
MEDIA–2.9% | | | | | | | | |
Liberty Global PLC–Series C(a) | | | 25,500 | | | | 1,231,905 | |
Time Warner, Inc. | | | 23,852 | | | | 2,037,438 | |
| | | | | | | | |
| | | | | | | 3,269,343 | |
| | | | | | | | |
MULTILINE RETAIL–1.4% | | | | | | | | |
Dillard’s, Inc.–Class A | | | 2,500 | | | | 312,950 | |
Dollar General Corp.(a) | | | 17,400 | | | | 1,230,180 | |
| | | | | | | | |
| | | | | | | 1,543,130 | |
| | | | | | | | |
SPECIALTY RETAIL–2.9% | | | | | | | | |
Foot Locker, Inc. | | | 22,636 | | | | 1,271,691 | |
GameStop Corp.–Class A(b) | | | 30,300 | | | | 1,024,140 | |
Office Depot, Inc.(a) | | | 116,348 | | | | 997,684 | |
| | | | | | | | |
| | | | | | | 3,293,515 | |
| | | | | | | | |
| | | | | | | 12,100,315 | |
| | | | | | | | |
UTILITIES–6.8% | | | | | | | | |
ELECTRIC UTILITIES–3.4% | | | | | | | | |
American Electric Power Co., Inc. | | | 16,600 | | | | 1,007,952 | |
Edison International | | | 33,000 | | | | 2,160,840 | |
Westar Energy, Inc. | | | 17,000 | | | | 701,080 | |
| | | | | | | | |
| | | | | | | 3,869,872 | |
| | | | | | | | |
GAS UTILITIES–1.6% | | | | | | | | |
Atmos Energy Corp. | | | 10,700 | | | | 596,418 | |
UGI Corp. | | | 31,650 | | | | 1,202,067 | |
| | | | | | | | |
| | | | | | | 1,798,485 | |
| | | | | | | | |
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS–1.3% | | | | | | | | |
Calpine Corp.(a) | | | 58,414 | | | | 1,292,702 | |
NRG Energy, Inc. | | | 5,615 | | | | 151,324 | |
| | | | | | | | |
| | | | | | | 1,444,026 | |
| | | | | | | | |
MULTI-UTILITIES–0.5% | | | | | | | | |
CenterPoint Energy, Inc. | | | 8,192 | | | | 191,939 | |
DTE Energy Co. | | | 2,000 | | | | 172,740 | |
| | | | | | | | |
Public Service Enterprise Group, Inc. | | | 5,800 | | | $ | 240,178 | |
| | | | | | | | |
| | | | | | | 604,857 | |
| | | | | | | | |
| | | | | | | 7,717,240 | |
| | | | | | | | |
INDUSTRIALS–6.2% | | | | | | | | |
AEROSPACE & DEFENSE–1.3% | | | | | | | | |
General Dynamics Corp. | | | 3,500 | | | | 481,670 | |
L-3 Communications Holdings, Inc. | | | 8,219 | | | | 1,037,320 | |
| | | | | | | | |
| | | | | | | 1,518,990 | |
| | | | | | | | |
AIRLINES–1.8% | | | | | | | | |
Delta Air Lines, Inc. | | | 41,200 | | | | 2,026,628 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–1.2% | | | | | | | | |
General Electric Co. | | | 52,700 | | | | 1,331,729 | |
| | | | | | | | |
MACHINERY–1.9% | | | | | | | | |
Caterpillar, Inc. | | | 11,106 | | | | 1,016,532 | |
Dover Corp. | | | 4,252 | | | | 304,953 | |
ITT Corp. | | | 20,800 | | | | 841,568 | |
| | | | | | | | |
| | | | | | | 2,163,053 | |
| | | | | | | | |
| | | | | | | 7,040,400 | |
| | | | | | | | |
CONSUMER STAPLES–4.1% | | | | | | | | |
BEVERAGES–0.1% | | | | | | | | |
Molson Coors Brewing Co.–Class B | | | 1,600 | | | | 119,232 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–2.2% | | | | | | | | |
CVS Health Corp. | | | 12,200 | | | | 1,174,982 | |
Kroger Co. (The) | | | 21,000 | | | | 1,348,410 | |
| | | | | | | | |
| | | | | | | 2,523,392 | |
| | | | | | | | |
FOOD PRODUCTS–1.1% | | | | | | | | |
Archer-Daniels-Midland Co. | | | 7,000 | | | | 364,000 | |
Ingredion, Inc. | | | 11,077 | | | | 939,773 | |
| | | | | | | | |
| | | | | | | 1,303,773 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–0.7% | | | | | | | | |
Procter & Gamble Co. (The) | | | 8,500 | | | | 774,265 | |
| | | | | | | | |
| | | | | | | 4,720,662 | |
| | | | | | | | |
TELECOMMUNICATION SERVICES–3.2% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–2.3% | | | | | | | | |
AT&T, Inc. | | | 70,400 | | | | 2,364,736 | |
CenturyLink, Inc. | | | 6,200 | | | | 245,396 | |
| | | | | | | | |
| | | | | | | 2,610,132 | |
| | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–0.9% | | | | | | | | |
Vodafone Group PLC (Sponsored ADR) | | | 29,500 | | | | 1,008,015 | |
| | | | | | | | |
| | | | | | | 3,618,147 | |
| | | | | | | | |
7
| | |
VALUE PORTFOLIO | | |
PORTFOLIOOF INVESTMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MATERIALS–2.2% | | | | | | | | |
CHEMICALS–2.0% | | | | | | | | |
CF Industries Holdings, Inc. | | | 725 | | | $ | 197,591 | |
Eastman Chemical Co. | | | 11,200 | | | | 849,632 | |
LyondellBasell Industries NV–Class A | | | 15,400 | | | | 1,222,606 | |
| | | | | | | | |
| | | | | | | 2,269,829 | |
| | | | | | | | |
METALS & MINING–0.2% | | | | | | | | |
Alcoa, Inc. | | | 14,100 | | | | 222,639 | |
| | | | | | | | |
| | | | | | | 2,492,468 | |
| | | | | | | | |
Total Common Stocks (cost $86,880,830) | | | | | | | 113,844,196 | |
| | | | | | | | |
| | Principal Amount (000) | | | | |
SHORT-TERM INVESTMENTS–1.6% | | | | | | | | |
TIME DEPOSIT–1.6% | | | | | | | | |
State Street Time Deposit 0.01%, 1/02/15 (cost $1,801,134) | | $ | 1,801 | | | | 1,801,134 | |
| | | | | | | | |
Total Investments Before Security Lending Collateral for Securities Loaned–101.3% (cost $88,681,964) | | | | | | | 115,645,330 | |
| | | | | | | | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–0.9% | | | | | | | | |
INVESTMENT COMPANIES–0.9% | | | | | | | | |
AB Exchange Reserves–Class I, 0.07%(c)(d) (cost $1,052,925) | | | 1,052,925 | | | $ | 1,052,925 | |
| | | | | | | | |
TOTAL INVESTMENTS–102.2% (cost $89,734,889) | | | | | | | 116,698,255 | |
Other assets less liabilities–(2.2)% | | | | | | | (2,505,461 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 114,192,794 | |
| | | | | | | | |
(a) | | Non-income producing security. |
(b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
(c) | | To obtain a copy of the fund’s financial statements, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AllianceBernstein at (800) 227-4618. |
(d) | | Investment in affiliated money market mutual fund. The rate shown represents the 7-day yield as of period end. |
Glossary:
ADR—American Depositary Receipt
See notes to financial statements.
8
| | |
VALUE PORTFOLIO | | |
STATEMENTOF ASSETS & LIABILITIES |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $88,681,964) | | $ | 115,645,330 | (a) |
Affiliated issuers (cost $1,052,925—investment of cash collateral for securities loaned) | | | 1,052,925 | |
Receivable for investment securities sold | | | 278,665 | |
Dividends and interest receivable | | | 147,917 | |
Receivable for capital stock sold | | | 1,912 | |
Receivable from class action settlement proceeds | | | 3,265 | |
| | | | |
Total assets | | | 117,130,014 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased | | | 1,628,420 | |
Payable for collateral received on securities loaned | | | 1,052,925 | |
Payable for capital stock redeemed | | | 84,411 | |
Advisory fee payable | | | 53,719 | |
Distribution fee payable | | | 23,967 | |
Administrative fee payable | | | 12,310 | |
Transfer Agent fee payable | | | 112 | |
Accrued expenses | | | 81,356 | |
| | | | |
Total liabilities | | | 2,937,220 | |
| | | | |
NET ASSETS | | $ | 114,192,794 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 7,428 | |
Additional paid-in capital | | | 110,279,968 | |
Undistributed net investment income | | | 1,856,727 | |
Accumulated net realized loss on investment and foreign currency transactions | | | (24,914,695 | ) |
Net unrealized appreciation on investments | | | 26,963,366 | |
| | | | |
| | $ | 114,192,794 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $ .001 par value
| | | | | | | | | | | | |
Class | | Net Assets | | | Shares Outstanding | | | Net Asset Value | |
A | | $ | 2,050,065 | | | | 132,290 | | | $ | 15.50 | |
B | | $ | 112,142,729 | | | | 7,296,134 | | | $ | 15.37 | |
(a) | | Includes securities on loan with a value of $1,024,140 (see Note E). |
See notes to financial statements.
9
| | |
VALUE PORTFOLIO | | |
STATEMENTOF OPERATIONS | | |
Year Ended December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $8,747) | | $ | 3,121,643 | |
Affiliated issuers | | | 242 | |
Interest | | | 137 | |
Securities lending income | | | 10,026 | |
| | | | |
| | $ | 3,132,048 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 677,619 | |
Distribution fee—Class B | | | 302,455 | |
Transfer agency—Class A | | | 113 | |
Transfer agency—Class B | | | 6,193 | |
Custodian | | | 80,148 | |
Printing | | | 69,371 | |
Administrative | | | 48,434 | |
Audit and tax | | | 40,998 | |
Legal | | | 33,177 | |
Directors’ fees | | | 4,504 | |
Miscellaneous | | | 8,273 | |
| | | | |
Total expenses | | | 1,271,285 | |
| | | | |
Net investment income | | | 1,860,763 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 19,670,880 | |
Net change in unrealized appreciation/depreciation of investments | | | (9,092,103 | ) |
| | | | |
Net gain on investment transactions | | | 10,578,777 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 12,439,540 | |
| | | | |
See notes to financial statements.
10
| | |
| | |
VALUE PORTFOLIO | | |
STATEMENT OF CHANGES IN NET ASSETS | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 1,860,763 | | | $ | 1,944,369 | |
Net realized gain on investment transactions | | | 19,670,880 | | | | 26,346,896 | |
Net change in unrealized appreciation/depreciation of investments | | | (9,092,103 | ) | | | 19,276,766 | |
| | | | | | | | |
Net increase in net assets from operations | | | 12,439,540 | | | | 47,568,031 | |
DIVIDENDS TO SHAREHOLDERS FROM | | | | | | | | |
Net investment income | | | | | | | | |
Class A | | | (42,060 | ) | | | (44,293 | ) |
Class B | | | (1,898,144 | ) | | | (2,863,346 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (30,782,902 | ) | | | (69,636,711 | ) |
| | | | | | | | |
Total decrease | | | (20,283,566 | ) | | | (24,976,319 | ) |
NET ASSETS | | | | | | | | |
Beginning of period | | | 134,476,360 | | | | 159,452,679 | |
| | | | | | | | |
End of period (including undistributed net investment income of $1,856,727 and $1,936,168, respectively) | | $ | 114,192,794 | | | $ | 134,476,360 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS |
December 31, 2014 | | AllianceBernstein Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AllianceBernstein Value Portfolio (the “Portfolio”) is a series of AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is long-term growth of capital. The Portfolio is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland on November 17, 1987, as an open-end series investment company. The Fund offers thirteen separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. Both classes of shares have identical voting, dividend, liquidating and other rights, except that Class B shares bear a distribution expense and have exclusive voting rights with respect to the Class B distribution plan.
The Portfolio offers and sells its shares only to separate accounts of certain life insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Sales are made without a sales charge at the Portfolio’s net asset value per share.
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) which require management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and amounts of income and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Portfolio.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the basis of market quotations or, if market quotations are not readily available or are deemed unreliable, at “fair value” as determined in accordance with procedures established by and under the general supervision of the Fund’s Board of Directors (the “Board”).
In general, the market values of securities which are readily available and deemed reliable are determined as follows: securities listed on a national securities exchange (other than securities listed on the NASDAQ Stock Market, Inc. (“NASDAQ”)) or on a foreign securities exchange are valued at the last sale price at the close of the exchange or foreign securities exchange. If there has been no sale on such day, the securities are valued at the last traded price from the previous day. Securities listed on more than one exchange are valued by reference to the principal exchange on which the securities are traded; securities listed only on NASDAQ are valued in accordance with the NASDAQ Official Closing Price; listed or over the counter (“OTC”) market put or call options are valued at the mid level between the current bid and ask prices. If either a current bid or current ask price is unavailable, AllianceBernstein L.P. (the “Adviser”) will have discretion to determine the best valuation (e.g. last trade price in the case of listed options); open futures are valued using the closing settlement price or, in the absence of such a price, the most recent quoted bid price. If there are no quotations available for the day of valuation, the last available closing settlement price is used; U.S. Government securities and any other debt instruments having 60 days or less remaining until maturity are generally valued at market by an independent pricing vendor, if a market price is available. If a market price is not available, the securities are valued at amortized cost. This methodology pertains to short term securities that have an original maturity of 60 days or less, as well as short term securities that had an original term to maturity that exceeded 60 days. Fixed-income securities, including mortgage-backed and asset-backed securities, may be valued on the basis of prices provided by a pricing service or at a price obtained from one or more of the major broker-dealers. In cases where broker-dealer quotes are obtained, the Adviser may establish procedures whereby changes in market yields or spreads are used to adjust, on a daily basis, a recently obtained quoted price on a security. Swaps and other derivatives are valued daily, primarily using independent pricing services, independent pricing models using market inputs, as well as third party broker-dealers or counterparties. Investment companies are valued at their net asset value each day.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, analysis of the issuer’s financial statements or other available documents. In addition, the Portfolio may use fair value pricing for securities primarily traded in non-U.S. markets because most foreign markets close well before the Portfolio values its securities at 4:00 p.m., Eastern Time. The earlier close of these foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim and may materially affect the value of those securities. To account for this, the Portfolio may frequently value many of its foreign equity securities using fair value prices based on third party vendor modeling tools to the extent available.
12
| | |
| | |
|
| | AllianceBernstein Variable Products Series Fund |
2. Fair Value Measurements
In accordance with U.S. GAAP regarding fair value measurements, fair value is defined as the price that the Portfolio would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a framework for measuring fair value, and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability (including those valued based on their market values as described in Note A.1 above). Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Portfolio. Unobservable inputs reflect the Portfolio’s own assumptions about the assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances. Each investment is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
| • | | Level 1—quoted prices in active markets for identical investments |
| • | | Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3—significant unobservable inputs (including the Portfolio’s own assumptions in determining the fair value of investments) |
Where readily available market prices or relevant bid prices are not available for certain equity investments, such investments may be valued based on similar publicly traded investments, movements in relevant indices since last available prices or based upon underlying company fundamentals and comparable company data (such as multiples to earnings or other multiples to equity). Where an investment is valued using an observable input, such as another publicly traded security, the investment will be classified as Level 2. If management determines that an adjustment is appropriate based on restrictions on resale, illiquidity or uncertainty, and such adjustment is a significant component of the valuation, the investment will be classified as Level 3. An investment will also be classified as Level 3 where management uses company fundamentals and other significant inputs to determine the valuation.
The following table summarizes the valuation of the Portfolio’s investments by the above fair value hierarchy levels as of December 31, 2014:
| | | | | | | | | | | | | | | | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks* | | $ | 113,844,196 | | | $ | –0 | – | | $ | –0 | – | | $ | 113,844,196 | |
Short-Term Investments | | | –0 | – | | | 1,801,134 | | | | –0 | – | | | 1,801,134 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 1,052,925 | | | | –0 | – | | | –0 | – | | | 1,052,925 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 114,897,121 | | | | 1,801,134 | | | | –0 | – | | | 116,698,255 | |
Other Financial Instruments** | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total^ | | $ | 114,897,121 | | | $ | 1,801,134 | | | $ | –0 | – | | $ | 116,698,255 | |
| | | | | | | | | | | | | | | | |
* | | See Portfolio of Investments for sector classifications. |
** | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/depreciation on the instrument. |
^ | | There were no transfers between any levels during the reporting period. |
The Portfolio recognizes all transfers between levels of the fair value hierarchy assuming the financial instruments were transferred at the beginning of the reporting period.
The Adviser has established a Valuation Committee (the “Committee”) which is responsible for overseeing the pricing and valuation of all securities held in the Portfolio. The Committee operates under pricing and valuation policies and procedures established by the Adviser and approved by the Board, including pricing policies which set forth the mechanisms and processes to be employed on a daily basis to implement these policies and procedures. In particular, the pricing policies describe how to determine market quotations for securities and other instruments. The Committee’s responsibilities include: 1) fair
13
| | |
VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
value and liquidity determinations (and oversight of any third parties to whom any responsibility for fair value and liquidity determinations is delegated), and 2) regular monitoring of the Adviser’s pricing and valuation policies and procedures and modification or enhancement of these policies and procedures (or recommendation of the modification of these policies and procedures) as the Committee believes appropriate.
The Committee is also responsible for monitoring the implementation of the pricing policies by the Adviser’s Pricing Group (the “Pricing Group”) and a third party which performs certain pricing functions in accordance with the pricing policies. The Pricing Group is responsible for the oversight of the third party on a day-to-day basis. The Committee and the Pricing Group perform a series of activities to provide reasonable assurance of the accuracy of prices including: 1) periodic vendor due diligence meetings, review of methodologies, new developments and processes at vendors, 2) daily comparison of security valuation versus prior day for all securities that exceeded established thresholds, and 3) daily review of unpriced, stale, and variance reports with exceptions reviewed by senior management and the Committee.
In addition, several processes outside of the pricing process are used to monitor valuation issues including: 1) performance and performance attribution reports are monitored for anomalous impacts based upon benchmark performance, and 2) portfolio managers review all portfolios for performance and analytics (which are generated using the Adviser’s prices).
3. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under forward currency exchange contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, foreign currency exchange contracts, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Portfolio’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.
4. Taxes
It is the Portfolio’s policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if any, to shareholders. Therefore, no provisions for federal income or excise taxes are required. The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation/depreciation as such income and/or gains are earned.
In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Portfolio’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Portfolio’s financial statements.
5. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Portfolio is informed of the dividend. Interest income is accrued daily. Investment transactions are accounted for on the date the securities are purchased or sold. Investment gains or losses are determined on the identified cost basis. The Portfolio amortizes premiums and accretes discounts as adjustments to interest income.
6. Class Allocations
All income earned and expenses incurred by the Portfolio are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Portfolio represented by the net assets of such class, except for class specific expenses which are allocated to the respective class. Expenses of the Fund are charged proportionately to each Portfolio or based on other appropriate methods. Realized and unrealized gains and losses are allocated among the various share classes based on respective net assets.
14
| | |
| | |
|
| | AllianceBernstein Variable Products Series Fund |
7. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 U.S. GAAP. 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 the investment advisory agreement, the Portfolio pays the Adviser an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion, of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly. The Adviser has agreed to waive its fees and bear certain expenses to the extent necessary to limit total operating expenses on an annual basis to 1.20% and 1.45% of daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2014, there were no expenses waived by the Adviser.
Pursuant to the investment advisory agreement, the Portfolio may reimburse the Adviser for certain legal and accounting services provided to the Portfolio by the Adviser. For the year ended December 31, 2014, the reimbursement for such services amounted to $48,434.
Brokerage commissions paid on investment transactions for the year ended December 31, 2014 amounted to $97,465, of which $0 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (“ABIS”), a wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for providing personnel and facilities to perform transfer agency services for the Portfolio. Such compensation retained by ABIS amounted to $1,385 for the year ended December 31, 2014.
NOTE C: Distribution Plan
The Portfolio has adopted a Distribution Plan (the “Plan”) for Class B shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, the Portfolio pays distribution and servicing fees to AllianceBernstein Investments, Inc. (the “Distributor”), a wholly-owned subsidiary of the Adviser, at an annual rate of up to .50% of the Portfolio’s average daily net assets attributable to Class B shares. The fees are accrued daily and paid monthly. The Board currently limits payments under the Plan to .25% of the Portfolio’s average daily net assets attributable to Class B shares. The Plan provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities.
The Portfolio is not obligated under the Plan to pay any distribution and servicing fees in excess of the amounts set forth above. The purpose of the payments to the Distributor under the Plan is to compensate the Distributor for its distribution services with respect to the sale of the Portfolio’s Class B shares. Since the Distributor’s compensation is not directly tied to its expenses, the amount of compensation received by it under the Plan during any year may be more or less than its actual expenses. For this reason, the Plan is characterized by the staff of the Securities and Exchange Commission as being of the “compensation” variety.
In the event that the Plan is terminated or not continued, no distribution or servicing fees (other than current amounts accrued but not yet paid) would be owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance the distribution of the Portfolio’s shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2014 were as follows:
| | | | | | | | |
| | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 50,709,951 | | | $ | 81,702,249 | |
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VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 90,053,452 | |
| | | | |
Gross unrealized appreciation | | | 28,586,443 | |
Gross unrealized depreciation | | | (1,941,640 | ) |
| | | | |
Net unrealized appreciation | | $ | 26,644,803 | |
| | | | |
1. Derivative Financial Instruments
The Portfolio may use derivatives in an effort to earn income and enhance returns, to replace more traditional direct investments, to obtain exposure to otherwise inaccessible markets (collectively, “investment purposes”), or to hedge or adjust the risk profile of its portfolio.
The Portfolio did not engage in derivatives transactions for the year ended December 31, 2014.
2. Currency Transactions
The Portfolio may invest in non-U.S. dollar securities on a currency hedged or unhedged basis. The Portfolio may seek investment opportunities by taking long or short positions in currencies through the use of currency-related derivatives, including forward currency exchange contracts, futures and options on futures, swaps, and other options. The Portfolio may enter into transactions for investment opportunities when it anticipates that a foreign currency will appreciate or depreciate in value but securities denominated in that currency are not held by the Portfolio and do not present attractive investment opportunities. Such transactions may also be used when the Adviser believes that it may be more efficient than a direct investment in a foreign currency-denominated security. The Portfolio may also conduct currency exchange contracts on a spot basis (i.e., for cash at the spot rate prevailing in the currency exchange market for buying or selling currencies).
NOTE E: Securities Lending
The Portfolio may enter into securities lending transactions. Under the Portfolio’s securities lending program, all loans of securities will be collateralized continually by cash. The Portfolio will be compensated for the loan from a portion of the net return from the income earned on cash collateral after a rebate is paid to the borrower (in some cases, this rebate may be a “negative rebate” or fee paid by the borrower to the Portfolio in connection with the loan), and payments are made for fees of the securities lending agent and for certain other administrative expenses. It is the policy of the Portfolio to receive collateral consisting of cash in an amount exceeding the value of the securities loaned. The Portfolio will have the right to call a loan and obtain the securities loaned at any time on notice to the borrower within the normal and customary settlement time for the securities. While the securities are on loan, the borrower is obligated to pay the Portfolio amounts equal to any income or other distributions from the securities. The Portfolio will not have the right to vote on any securities during the existence of a loan, but will have the right to regain ownership of loaned securities in order to exercise voting or other ownership rights. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent will invest the cash collateral received in AB Exchange Reserves, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio, and as approved by the Board. The collateral received on securities loaned is recorded as an asset as well as a corresponding liability in the statement of assets and liabilities. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. At December 31, 2014, the Portfolio had securities on loan with a value of $1,024,140 and had received cash collateral which has been invested into AB Exchange Reserves of $1,052,925. The cash collateral will be adjusted on the next business day to maintain the required collateral amount. The Portfolio earned securities lending income of $10,026 and $242 from the borrowers and AB Exchange Reserves, respectively, for the year ended December 31, 2014; these amounts are reflected in the statement of operations. A principal risk of lending portfolio securities is that the borrower will fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. A summary of the Portfolio’s transactions in shares of AB Exchange Reserves for the year ended December 31, 2014 is as follows:
| | | | | | | | | | | | | | |
Market Value December 31, 2013 (000) | | | Purchases at Cost (000) | | | Sales Proceeds (000) | | | Market Value December 31, 2014 (000) | |
$ | 0 | | | $ | 7,936 | | | $ | 6,883 | | | $ | 1,053 | |
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|
| | AllianceBernstein Variable Products Series Fund |
NOTE F: Capital Stock
Each class consists of 500,000,000 authorized shares. Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | | | | | |
| | SHARES | | | | | AMOUNT | |
| | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | | | | | Year Ended December 31, 2014 | | | Year Ended December 31, 2013 | |
Class A | | | | | | | | | | | | | | | | | | |
Shares sold | | | 5,694 | | | | 23,224 | | | | | $ | 83,425 | | | $ | 286,557 | |
Shares issued in reinvestment of dividends | | | 2,832 | | | | 3,455 | | | | | | 42,059 | | | | 44,293 | |
Shares redeemed | | | (31,302 | ) | | | (15,732 | ) | | | | | (472,031 | ) | | | (196,764 | ) |
| | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (22,776 | ) | | | 10,947 | | | | | $ | (346,547 | ) | | $ | 134,086 | |
| | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | |
Shares sold | | | 201,840 | | | | 405,430 | | | | | $ | 2,930,423 | | | $ | 5,020,795 | |
Shares issued in reinvestment of dividends | | | 128,775 | | | | 225,106 | | | | | | 1,898,144 | | | | 2,863,346 | |
Shares redeemed | | | (2,418,029 | ) | | | (6,229,165 | ) | | | | | (35,264,922 | ) | | | (77,654,938 | ) |
| | | | | | | | | | | | | | | | | | |
Net decrease | | | (2,087,414 | ) | | | (5,598,629 | ) | | | | $ | (30,436,355 | ) | | $ | (69,770,797 | ) |
| | | | | | | | | | | | | | | | | | |
NOTE G: Risks Involved in Investing in the Portfolio
Foreign Securities Risk—Investing in securities of foreign companies or foreign governments involves special risks which include changes in foreign currency 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 U.S. companies or of the U.S. government.
Currency Risk—This is the risk that changes in foreign currency exchange rates may negatively affect the value of the Portfolio’s investments or reduce the returns of the Portfolio. For example, the value of the Portfolio’s investments in foreign currency-denominated securities or currencies may decrease if the U.S. dollar is strong (i.e., gaining value relative to other currencies) and other currencies are weak (i.e., losing value relative to the U.S. dollar). Currency markets are generally not as regulated as securities markets. Independent of the Portfolio’s investments denominated in foreign currencies, the Portfolio’s positions in various foreign currencies may cause the Portfolio to experience investment losses due to the changes in exchange rates and interest rates.
Derivatives Risk—The Portfolio may enter into derivative transactions such as forwards, options, futures and swaps. Derivatives may be illiquid, difficult to price, and leveraged so that small changes may produce disproportionate losses for the Portfolio, and subject to counterparty risk to a greater degree than more traditional investments. Derivatives may result in significant losses, including losses that are far greater than the value of the derivatives reflected in the statement of assets and liabilities.
Indemnification Risk—In the ordinary course of business, the Portfolio enters into contracts that contain a variety of indemnifications. The Portfolio’s maximum exposure under these arrangements is unknown. However, the Portfolio has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. Therefore, the Portfolio has not accrued any liability in connection with these indemnification provisions.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $280 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 miscellaneous expenses in the statement of operations. The Portfolio did not utilize the Facility during the year ended December 31, 2014.
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VALUE PORTFOLIO | | |
NOTES TO FINANCIAL STATEMENTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2014 and December 31, 2013 were as follows:
| | | | | | | | |
| | 2014 | | | 2013 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 1,940,204 | | | $ | 2,907,639 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 1,940,204 | | | $ | 2,907,639 | |
| | | | | | | | |
As of December 31, 2014, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 1,856,727 | |
Accumulated capital and other losses | | | (24,596,132 | )(a) |
Unrealized appreciation/(depreciation) | | | 26,644,803 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 3,905,398 | |
| | | | |
(a) | | On December 31, 2014, the Portfolio had a net capital loss carryforward of $24,596,132. During the fiscal year, the Portfolio utilized $19,645,492 of capital loss carryforwards to offset current year net realized gains. |
(b) | | The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an indefinite period. These post-enactment capital losses must be utilized prior to the pre-enactment capital losses, which are subject to expiration. Post-enactment capital loss carryforwards will retain their character as either short-term or long-term capital losses rather than being considered short-term as under previous regulation. As of December 31, 2014, the Portfolio had a net capital loss carryforward of $24,596,132 which will expire in 2017.
During the current fiscal year, there were no permanent differences that resulted in adjustments to undistributed net investment income, accumulated net realized loss on investment and foreign currency transactions, or additional paid-in capital.
NOTE J: Subsequent Events
Management has evaluated subsequent events for possible recognition or disclosure in the financial statements through the date the financial statements are issued. Management has determined that there are no material events that would require disclosure in the Portfolio’s financial statements through this date.
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VALUE PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS A | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $14.22 | | | | $10.63 | | | | $9.37 | | | | $9.84 | | | | $8.97 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .26 | | | | .19 | | | | .20 | | | | .17 | | | | .12 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | 1.31 | | | | 3.70 | | | | 1.26 | | | | (.50 | ) | | | .93 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 1.57 | | | | 3.89 | | | | 1.46 | | | | (.33 | ) | | | 1.05 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.29 | ) | | | (.30 | ) | | | (.20 | ) | | | (.14 | ) | | | (.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $15.50 | | | | $14.22 | | | | $10.63 | | | | $9.37 | | | | $9.84 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 11.10 | %* | | | 36.85 | %* | | | 15.73 | % | | | (3.50 | )% | | | 11.81 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $2,050 | | | | $2,205 | | | | $1,533 | | | | $1,517 | | | | $1,707 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | .79 | % | | | .73 | % | | | .72 | % | | | .71 | % | | | .71 | %+ |
Net investment income | | | 1.74 | % | | | 1.51 | % | | | 1.98 | % | | | 1.78 | % | | | 1.37 | %+ |
Portfolio turnover rate | | | 42 | % | | | 44 | % | | | 40 | % | | | 62 | % | | | 73 | % |
See footnote summary on page 20.
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VALUE PORTFOLIO | | |
FINANCIAL HIGHLIGHTS | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | CLASS B | |
| | Year Ended December 31, | |
| | 2014 | | | 2013 | | | 2012 | | | 2011 | | | 2010 | |
Net asset value, beginning of period | | | $14.10 | | | | $10.54 | | | | $9.28 | | | | $9.75 | | | | $8.90 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .22 | | | | .16 | | | | .17 | | | | .15 | | | | .10 | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | 1.29 | | | | 3.66 | | | | 1.26 | | | | (.50 | ) | | | .91 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 1.51 | | | | 3.82 | | | | 1.43 | | | | (.35 | ) | | | 1.01 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.24 | ) | | | (.26 | ) | | | (.17 | ) | | | (.12 | ) | | | (.16 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $15.37 | | | | $14.10 | | | | $10.54 | | | | $9.28 | | | | $9.75 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (b) | | | 10.77 | %* | | | 36.49 | %* | | | 15.54 | % | | | (3.78 | )% | | | 11.42 | %* |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $112,143 | | | | $132,271 | | | | $157,920 | | | | $175,183 | | | | $212,522 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses | | | 1.04 | % | | | .98 | % | | | .97 | % | | | .96 | % | | | .96 | %+ |
Net investment income | | | 1.51 | % | | | 1.28 | % | | | 1.72 | % | | | 1.51 | % | | | 1.12 | %+ |
Portfolio turnover rate | | | 42 | % | | | 44 | % | | | 40 | % | | | 62 | % | | | 73 | % |
(a) | | Based on average shares outstanding. |
(b) | | 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 return does not reflect (i) insurance company’s separate account related expense charges and (ii) the deductions of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Total investment return calculated for a period of less than one year is not annualized. |
* | | Includes the impact of proceeds received and credited to the Portfolio resulting from class action settlements, which enhanced the Portfolio’s performance for the years ended December 31, 2014, December 31, 2013, and December 31, 2010 by 0.04%%, 0.07%, and 0.01%, respectively. |
+ | | The ratio includes expenses attributable to costs of proxy solicitation. |
See notes to financial statements.
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REPORTOF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM | | AllianceBernstein Variable Products Series Fund |
To the Board of Directors and Shareholders of AllianceBernstein Value Portfolio:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of AllianceBernstein Value Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc. (the “Fund”)) as of December 31, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others were not received. 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 AllianceBernstein Value Portfolio (one of the funds constituting AllianceBernstein Variable Products Series Fund, Inc.) at December 31, 2014, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
February 13, 2015
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2014 TAX INFORMATION (unaudited) | | AllianceBernstein Variable Products Series Fund |
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during the taxable year ended December 31, 2014. For corporate shareholders, 100% of dividends paid qualify for the dividends received deduction.
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VALUE PORTFOLIO | | AllianceBernstein Variable Products Series Fund |
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BOARDOF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman John H. Dobkin(1) Michael J. Downey(1) William H. Foulk, Jr.(1) D. James Guzy(1) | | Nancy P. Jacklin(1) Robert M. Keith, President and Chief Executive Officer Garry L. Moody(1) Earl D. Weiner(1) |
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OFFICERS | | |
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer Christopher W. Marx(2), Vice President Joseph G. Paul(2), Vice President Gregory L. Powell(2), Vice President | | Emilie D. Wrapp, Secretary Joseph J. Mantineo, Treasurer and Chief Financial Officer Phyllis J. Clarke, Controller Vincent S. Noto, Chief Compliance Officer |
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CUSTODIANAND ACCOUNTING AGENT | | LEGAL COUNSEL |
State Street Bank and Trust Company | | Seward & Kissel LLP |
State Street Corporation CCB/5 1 Iron Street | | One Battery Park Plaza New York, NY 10004 |
Boston, MA 02210 | | |
| | |
DISTRIBUTOR | | TRANSFER AGENT |
AllianceBernstein Investments, Inc. | | AllianceBernstein Investor Services, Inc. |
1345 Avenue of the Americas | | P.O. Box 786003 |
New York, NY 10105 | | San Antonio, TX 78278-6003 |
| | Toll-free 1-(800) 221-5672 |
| | |
INDEPENDENT REGISTERED PUBLIC | | |
ACCOUNTING FIRM | | |
Ernst & Young LLP | | |
5 Times Square | | |
New York, NY 10036 | | |
(1) | | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
(2) | | The day-to-day management of, and investment decisions for, the Portfolio’s portfolio are made by the U.S. Value Senior Investment Management Team. Mr. Joseph G. Paul, Mr. Christopher W. Marx and Mr. Gregory L. Powell are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
23
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VALUE PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | AllianceBernstein Variable Products Series Fund |
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the Board of Directors. Certain information concerning the Fund’s Directors is set forth below.
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NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
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INTERESTED DIRECTOR | | | | | | | | |
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Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 54 (2010) | | Senior Vice President of AllianceBernstein L.P. (the “Adviser”) and the head of AllianceBernstein Investments, Inc. (“ABI”) since July 2008; Director of ABI and President of the AB Mutual Funds. Previously, he served as Executive Managing Director of ABI from December 2006 to June 2008. Prior to joining ABI in 2006, Executive Managing Director of Bernstein Global Wealth Management, and prior thereto, Senior Managing Director and Global Head of Client Service and Sales of the Adviser’s institutional investment management business since 2004. Prior thereto, he was Managing Director and Head of North American Client Service and Sales in the Adviser’s institutional investment management business, with which he had been associated since prior to 2004. | | | 116 | | | None |
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DISINTERESTED DIRECTORS | | | | | | |
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Marshall C. Turner, Jr., ## Chairman of the Board 73 (2005) | | Private Investor since prior to 2010. Former CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing), 2003-2006, and interim CEO 1999-2000. He has extensive operating and early-stage investment experience, including prior service as general partner of institutional venture capital partnerships, and serves on the boards of three education and science-related non-profit organizations. He has served as a director of one AB fund since 1992, and director or trustee of multiple AB funds since 2005. He has been Chairman of the AB Funds since January 2014, and the Chairman of the Independent Directors Committees of such Funds since February 2014. | | | 116 | | | Xilinx, Inc. (programmable logic semi-conductors) since 2007 and SunEdison, Inc. (solar materials and power plants) from 2007 until July 2014 |
24
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
John H. Dobkin, ## 73 (1992) | | Independent Consultant since prior to 2010. Formerly, President of Save Venice, Inc. (preservation organization) from 2001–2002; Senior Advisor from June 1999–June 2000 and President of Historic Hudson Valley (historic preservation) from December 1989–May 1999. Previously, Director of the National Academy of Design. He has served as a director or trustee of various AB Funds since 1992, and as Chairman of the Audit Committees of a number of such Funds from 2001–2008. | | | 116 | | | None |
| | | | | | | | |
Michael J. Downey, ## 71 (2005) | | Private Investor since prior to 2010. Formerly, managing partner of Lexington Capital, LLC (investment advisory firm) from December 1997 until December 2003. He served as a Director of Prospect Acquisition Corp. (financial services) from 2007 until 2009. From 1987 until 1993, Chairman and CEO of Prudential Mutual Fund Management, director of the Prudential mutual funds, and member of the Executive Committee of Prudential Securities Inc. He has served as a director or trustee of the AB Funds since 2005 and is a director and Chairman of one other registered investment company. | | | 116 | | | Asia Pacific Fund, Inc. (registered investment company) since prior to 2010, and The Merger Fund (registered investment company) since prior to 2010 until 2013 |
| | | | | | | | |
William H. Foulk, Jr., ## 82 (1990) | | Investment Adviser and an Independent Consultant since prior to 2010. Previously, he was Senior Manager of Barrett Associates, Inc., a registered investment adviser. He was formerly Deputy Comptroller and Chief Investment Officer of the State of New York and, prior thereto, Chief Investment Officer of the New York Bank for Savings. He has served as a director or trustee of various AB Funds since 1983, and was Chairman of the Independent Directors Committees of the AB Funds from 2003 until early February 2014. He served as Chairman of such Funds from 2003 through December 2013. He is also active in a number of mutual fund related organizations and committees. | | | 116 | | | None |
| | | | | | | | |
25
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VALUE PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
D. James Guzy, ## 78 (2005) | | Chairman of the Board of SRC Computers, Inc. (semi-conductors), with which he has been associated since prior to 2010. He served as Chairman of the Board of PLX Technology (semi-conductors) since prior to 2010 until November 2013. He was a director of Intel Corporation (semi-conductors) from 1969 until 2008, and served as Chairman of the Finance Committee of such company for several years until May 2008. He has served as a director or trustee of one or more of the AB Funds since 1982. | | | 116 | | | PLX Technology (semi-conductors) since prior to 2010 until November 2013 and Cirrus Logic Corporation (semi-conductors) since prior to 2010 until July 2011 |
| | | | | | | | |
Nancy P. Jacklin, ## 66 (2006) | | Professorial Lecturer at the Johns Hopkins School of Advanced International Studies since 2008. Formerly, U.S. Executive Director of the International Monetary Fund (which is responsible for ensuring the stability of the international monetary system), (December 2002–May 2006); Partner, Clifford Chance (1992–2002); Sector Counsel, International Banking and Finance, and Associate General Counsel, Citicorp (1985–1992); Assistant General Counsel (International), Federal Reserve Board of Governors (1982–1985); and Attorney Advisor, U.S. Department of the Treasury (1973–1982). Member of the Bar of the District of Columbia and of New York; and member of the Council on Foreign Relations. She has served as a director or trustee of the AB Funds since 2006 and has been Chairman of the Governance and Nominating Committees of the Funds since August 2014. | | | 116 | | | None |
| | | | | | | | |
Garry L. Moody, ## 62 (2008) | | Independent Consultant. Formerly, Partner, Deloitte & Touche LLP (1995–2008) where he held a number of senior positions, including Vice Chairman, and U.S. and Global Investment Management Practice Managing Partner; President, Fidelity Accounting and Custody Services Company (1993–1995); and Partner, Ernst & Young LLP (1975–1993), where he served as the National Director of Mutual Fund Tax Services and Managing Partner of its Chicago Office Tax department. He is a member of both the Governing Council of the Independent Directors Council (IDC), an organization of independent directors of mutual funds, and the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 116 | | | None |
26
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| | AllianceBernstein Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER RELEVANT QUALIFICATIONS*** | | PORTFOLIOS IN FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER DIRECTORSHIP HELD BY DIRECTOR IN THE PAST FIVE YEARS |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner, ## 75 (2007) | | Of Counsel, and Partner prior to January 2007, of the law firm Sullivan & Cromwell LLP and is a former member of the ABA Federal Regulation of Securities Committee Task Force to draft editions of the Fund Director’s Guidebook. He also serves as a director or trustee of various non-profit organizations and has served as Chairman or Vice Chairman of a number of them. He has served as a director or trustee of the AB Funds since 2007 and served as Chairman of the Governance and Nominating Committees of the AB Funds from 2007 until August 2014. | | | 116 | | | None |
* | The address for each of the Portfolio’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Philip L. Kirstein, 1345 Avenue of the Americas, New York, NY 10105. |
** | There is no stated term of office for the Fund’s Directors. |
*** | The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led to the conclusion that each Director should serve as a Director for the Fund. |
# | Mr. Keith is an “interested person” of the Fund, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. |
## | Member of the Audit Committee, the Governance and Nominating Committee and the Independent Directors Committee. |
27
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VALUE PORTFOLIO | | |
MANAGEMENTOFTHE FUND | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Officer Information
Certain information concerning the Portfolio’s Officers is listed below.
| | | | |
NAME, ADDRESS* AND AGE | | PRINCIPAL POSITION(S) HELD WITH FUND | | PRINCIPAL OCCUPATION DURING PAST FIVE YEARS |
Robert M. Keith 54 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Philip L. Kirstein 69 | | Senior Vice President and Independent Compliance Officer | | Senior Vice President and Independent Compliance Officer of the AB Funds, with which he has been associated since October 2004. Prior thereto, he was Of Counsel to Kirkpatrick & Lockhart, LLP from October 2003 to October 2004, and General Counsel of Merrill Lynch Investment Managers, L.P. since prior to March 2003. |
| | | | |
Christopher W. Marx 47 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Joseph G. Paul 55 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Gregory L. Powell 56 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2010. |
| | | | |
Emilie D. Wrapp 59 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2010. |
| | | | |
Joseph J. Mantineo 55 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2010. |
| | | | |
Phyllis J. Clarke 54 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2010. |
| | | | |
Vincent S. Noto 50 | | Chief Compliance Officer | | Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since 2014. Prior thereto, he was Vice President and Director of Mutual Fund Compliance of the Adviser** since prior to 2010. |
* | | The address for each of the Portfolio’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
** | | The Adviser, ABIS and ABI are affiliates of the Fund. |
| | The Fund’s Statement of Additional Information (“SAI”) has additional information about the Fund’s Directors and Officers and is available without charge upon request. Contact your financial representative or the Adviser at (800) 227-4618, or visit www.abglobal.com, for a free prospectus or SAI. |
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VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | AllianceBernstein Variable Products Series Fund |
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER’S EVALUATION OF INVESTMENT ADVISORY AGREEMENT1
The following is a summary of the evaluation of the Investment Advisory Agreement between AllianceBernstein L.P. (the “Adviser”) and the AllianceBernstein Variable Products Series Fund (the “Fund”), in respect of AllianceBernstein Value Portfolio (the “Portfolio”).2 The evaluation of the Investment Advisory Agreement was prepared by Philip L. Kirstein, the Senior Officer of the Fund, for the Directors of the Fund, as required by a September 2004 agreement between the Adviser and the New York State Attorney General (the “NYAG”). The Senior Officer’s evaluation of the Investment Advisory Agreement is not meant to diminish the responsibility or authority of the Board of Directors of the Fund to perform its duties pursuant to Section 15 of the Investment Company Act of 1940 (the “40 Act”) and applicable state law. The purpose of the summary is to provide shareholders with a synopsis of the independent evaluation of the reasonableness of the advisory fees proposed to be paid by the Portfolio which was provided to the Directors in connection with their review of the proposed approval of the continuance of the Investment Advisory Agreement. The Senior Officer’s evaluation considered the following factors:
| 1. | Advisory fees charged to institutional and other clients of the Adviser for like services; |
| 2. | Advisory fees charged by other mutual fund companies for like services; |
| 3. | Costs to the Adviser and its affiliates of supplying services pursuant to the advisory agreement, excluding any intra-corporate profit; |
| 4. | Profit margins of the Adviser and its affiliates from supplying such services; |
| 5. | Possible economies of scale as the Portfolio grows larger; and |
| 6. | Nature and quality of the Adviser’s services including the performance of the Portfolio. |
These factors, with the exception of the first factor, are generally referred to as the “Gartenberg factors,” which were articulated by the United States Court of Appeals for the Second Circuit in 1982. Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982). The first factor is an additional factor required to be considered by the AoD. On March 30, 2010, the Supreme Court held the Gartenberg decision was correct in its basic formulation of what §36(b) requires: to face liability under §36(b), “an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” Jones v. Harris Associates L.P., 130 S. Ct. 1418 (2010). In the Jones decision, the Court stated the Gartenberg approach fully incorporates the correct understanding of fiduciary duty within the context of section 36(b) and noted with approval that “Gartenberg insists that all relevant circumstances be taken into account” and “uses the range of fees that might result from arm’s-length bargaining as the benchmark for reviewing challenged fees.”3
PORTFOLIO ADVISORY FEES, NET ASSETS & EXPENSE RATIOS
The Adviser proposed that the Portfolio pays the advisory fee set forth in the table below for receiving the services to be provided pursuant to the Investment Advisory Agreement. The fee schedule below, implemented in January 2004 in consideration of the Adviser’s settlement with the NYAG in December 2003, is based on a master schedule that contemplates eight categories of funds with almost all funds in each category having the same advisory fee schedule.
| | | | | | |
Portfolio | | Category | | Advisory Fee Based on % of Average Daily Net Assets | | Net Assets 03/31/14 ($MIL) |
Value Portfolio | | Value | | 0.55% on first $2.5 billion 0.45% on next $2.5 billion 0.40% on the balance | | $128.2 |
1 | | The information in the fee summary was completed on April 25, 2014 and discussed with the Board of Directors on May 6-8, 2014. |
2 | | Future references to the Fund and the Portfolio do not include “AllianceBernstein.” References in the fee summary pertaining to performance and expense ratio rankings refer to the Class A shares of the Portfolio. |
3 | | Jones v. Harris at 1427. |
29
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VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
The Adviser is reimbursed as specified in the Investment Advisory Agreement for certain clerical, legal, accounting, administrative and other services provided to the Portfolio. During the Portfolio’s most recently completed fiscal year, the Adviser received $55,163 (0.036% of the Portfolio’s average daily net assets) for such services.
The Adviser has agreed to waive that portion of its management fees and/or reimburse the Portfolio for that portion of its total operating expenses to the degree necessary to limit the Portfolio’s expense ratios to the amounts set forth below for the Portfolio’s fiscal year. The waiver is terminable by the Adviser upon at least 60 days’ notice prior to the Portfolio’s prospectus update. The Portfolio was operating below its expense caps for the most recent fiscal year; accordingly the expense limitation undertaking of the Portfolio was of no effect. In addition, set forth below are the gross expense ratios of the Portfolio for the most recently completed fiscal year:
| | | | | | | | |
Portfolio | | Expense Cap Pursuant to Expense Limitation Undertaking | | Gross Expense Ratio | | | Fiscal Year End |
Value Portfolio | | Class A 1.20% | | | 0.73% | | | December 31 |
| | Class B 1.45% | | | 0.98% | | | |
I. ADVISORY FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The advisory fees charged to investment companies which the Adviser manages and sponsors are normally higher than those charged to similar sized institutional accounts, including pension plans and sub-advised investment companies. The fee differential reflects, among other things, different services provided to such clients, and different liabilities assumed. Services provided by the Adviser to the Portfolio that are not provided to non-investment company clients and sub-advised investment companies include providing office space and personnel to serve as Fund Officers, who among other responsibilities make the certifications required under the Sarbanes–Oxley Act of 2002, and coordinating with and monitoring the Portfolio’s third party service providers such as Fund counsel, auditors, custodians, transfer agents and pricing services. The accounting, administrative, legal and compliance requirements for the Portfolio are more costly than those for institutional assets due to the greater complexities and time required for investment companies, although as previously noted, the Adviser is reimbursed for providing such services. Also, retail mutual funds managed by the Adviser are widely held. Servicing the Portfolio’s investors is more time consuming and labor intensive compared to institutional clients since the Adviser needs to communicate with a more extensive network of financial intermediaries and shareholders. The Adviser also believes that it incurs substantial entrepreneurial risk when offering a new mutual fund, since establishing a new mutual fund requires a large upfront investment, and it may take a long time for the fund to achieve profitability since the fund must be priced to scale from inception in order to be competitive and assets are acquired one account at a time. In addition, managing the cash flow of an investment company may be more difficult than managing that of a stable pool of assets, such as an institutional account with little cash movement in either direction, particularly, if a fund is in net redemption and the Adviser is frequently forced to sell securities to raise cash for redemptions. However, managing a fund with positive cash flow may be easier at times than managing a stable pool of assets. In recent years, investment advisers have been sued by institutional clients and have suffered reputational damage both by the attendant publicity and outcomes other than complete victories. Accordingly, the legal and reputational risks associated with institutional accounts are greater than previously thought, although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser’s view that managing an investment company is not comparable to managing other institutional accounts because the services provided are different, the Supreme Court has indicated consideration should be given to the advisory fees charged to institutional accounts that have a substantially similar investment style as the Portfolio.4 In
4 | | The Supreme Court stated that “courts may give such comparisons the weight that they merit in light of the similaritis and differences between the services that the clients in question require, but the courts must be wary of inapt comparisons.” Among the significant differences the Supreme Court noted that may exist between services provided to mutual funds and institutional accounts are “higher marketing costs.” Jones v. Harris at 1428. |
30
| | |
| | AllianceBernstein Variable Products Series Fund |
addition to the AllianceBernstein institutional fee schedule, set forth below is what would have been the effective advisory fee of the Portfolio had the AllianceBernstein institutional fee schedule been applicable to the Portfolio versus the Portfolio’s advisory fee based on March 31, 2014 net assets:5
| | | | | | | | | | | | |
Portfolio | | Net Assets 3/31/14 ($MIL) | | AllianceBernstein Institutional Fee Schedule | | Effective AB Inst. Adv. Fee | | | Portfolio Advisory Fee | |
Value Portfolio | | $128.2 | | U.S. Diversified Value | | | 0.446 | % | | | 0.550 | % |
| | | | 0.65% on 1st $25 million | | | | | | | | |
| | | | 0.50% on next $25 million | | | | | | | | |
| | | | 0.40% on next $50 million | | | | | | | | |
| | | | 0.30% on next $100 million | | | | | | | | |
| | | | 0.25% on the balance | | | | | | | | |
| | | | Minimum account size: $25 m | | | | | | | | |
The Adviser also manages AllianceBernstein Trust, Inc.—Value Fund (“Value Fund”), a retail mutual fund, which has a substantially similar investment style as the Portfolio. Set forth below are the fee schedule of Value Fund and what would have been the effective advisory fee of the Portfolio had the fee schedule of the retail mutual fund been applicable to the Portfolio:6
| | | | | | | | | | | | |
Portfolio | | AllianceBernstein Mutual Fund | | Fee Schedule | | ABMF Effective Fee | | | Portfolio Advisory Fee | |
Value Portfolio | | Value Fund | | 0.55% on first $2.5 billion | | | 0.550 | % | | | 0.550 | % |
| | | | 0.45% on next $2.5 billion | | | | | | | | |
| | | | 0.40% on the balance | | | | | | | | |
The Adviser provides sub-advisory services to certain other investment companies managed by other fund families that have an investment style similar to that of the Portfolio. The Adviser charges the fees set forth below for the sub-advisory relationships that have a somewhat similar investment style as the Portfolio. Also shown are the Portfolio’s advisory fees and what would have been the effective advisory fees of the Portfolio had the fee schedules of the sub-advisory relationships been applicable to the Portfolio based on March 31, 2014 net assets.
| | | | | | | | | | | | |
Portfolio | | | | Fee Schedule | | Effective Sub-Adv. Fee | | | Portfolio Advisory Fee | |
Value Portfolio | | Client #17 | | 0.49% on the first $100 million 0.30% on the next $100 million 0.25% on the balance | | | 0.448% | | | | 0.550% | |
| | | | |
| | Client #27 | | 0.30% of the average daily net assets | | | 0.300% | | | | 0.550% | |
It is fair to note that the services the Adviser provides pursuant to sub-advisory agreements are generally confined to the services related to the investment process; in other words, they are not as comprehensive as the services provided to the Portfolio by the Adviser. In addition, to the extent that certain of these sub-advisory relationships are with affiliates of the Adviser, the fee schedules may not reflect arm’s length bargaining or negotiations.
While it appears that the sub-advisory relationships are paying a lower fee than the Portfolio, it is difficult to evaluate the relevance of such lower fees due to differences in terms of the services provided, risks involved and other competitive factors between the Portfolio and the sub-advisory relationship. There could be various business reasons why an investment adviser would be willing to provide a sub-advisory relationship investment related services at a different fee level than an investment company it is sponsoring where the investment adviser is providing all the services, not just investment management, generally required by a registered investment company.
5 | | The Adviser has indicated that with respect to institutional accounts with assets greater than $300 million, it will negotiate a fee schedule. Discounts that are negotiated vary based upon each client relationship. |
6 | | The retail mutual fund was also affected by the settlement between the Adviser and the NYAG. As a result, the Portfolio has the same breakpoints in its advisory fee schedule as the retail mutual fund. |
7 | | The client is an affiliate of the Adviser. |
31
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VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper Inc. (“Lipper”), an analytical service that is not affiliated with the Adviser compared the fees charged to the Portfolio with fees charged to other investment companies for similar services offered by other investment advisers.8 Lipper’s analysis included the comparison of the Portfolio’s contractual management fee, estimated at the approximate current asset level of the Portfolio, to the median of the Portfolio’s Lipper Expense Group (“EG”) and the Portfolio’s contractual management fee ranking.9,10
Lipper describes an EG as a representative sample of comparable funds. Lipper’s standard methodology for screening funds to be included in an EG entails the consideration of several fund criteria, including fund type, investment classification/objective, load type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, expense components and attributes. An EG will typically consist of seven to twenty funds.
| | | | | | | | | | | | |
Portfolio | | Contractual Management Fee (%)11 | | | Lipper EG Median (%) | | | Lipper EG Rank | |
Value Portfolio | | | 0.550 | | | | 0.743 | | | | 1/12 | |
Lipper also analyzed the Portfolio’s most recently competed fiscal year total expense ratio in comparison to the Portfolio’s EG and Lipper Expense Universe (“EU”). The EU12 is a broader group compared to the EG, consisting of all funds that have the same investment classification/objective and load type as the subject Portfolio.
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Expense Ratio (%)13 | | | Lipper EG Median (%) | | | Lipper EG Rank | | | Lipper EU Median (%) | | | Lipper EU Rank | |
Value Portfolio | | | 0.730 | | | | 0.775 | | | | 3/12 | | | | 0.763 | | | | 14/33 | |
Based on this analysis, the Portfolio has a more favorable ranking on a contractual management fee basis than on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO THE ADVISORY FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
The Adviser utilizes two profitability reporting systems, which operate independently but are aligned with each other, to estimate the Adviser’s profitability in connection with investment advisory services provided to the Portfolio. The Senior Officer has retained a consultant to provide independent advice regarding the alignment of the two profitability systems as well as the methodologies and allocations utilized by both profitability systems.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH SERVICES.
The Portfolio’s profitability information, prepared by the Adviser for the Board of Directors, was reviewed by the Senior Officer and the consultant. The Adviser’s profitability from providing investment advisory services to the Portfolio increased during calendar year 2013, relative to 2012.
8 | | The Supreme Court cautioned against accepting mutual fund fee comparisons without careful scrutiny since “these comparisons are problematic because these fees, like those challenged, may not be the product of negotiations conducted at arm’s length.” Jones v. Harris at 1429. |
9 | | Lipper does not consider average account size when constructing EGs. Funds with relatively small average account sizes tend to have higher transfer agent expense ratio than comparable sized funds that have relatively large average account sizes. Note that there are limitations on Lipper expense category data because different funds categorize expenses differently. |
10 | | The contractual management fee is calculated by Lipper using the Portfolio’s contractual management fee rate at a hypothetical asset level .The hypothetical asset level is based on the combined net assets of all classes of the Portfolio, rounded up to the next $25 million. Lipper’s total expense ratio information is based on the most recent annual report except as otherwise noted. A ranking of “1”would mean that the Portfolio had the lowest effective fee rate in the Lipper peer group. |
11 | | The contractual management fee does not reflect any expense reimbursements made by the Portfolio to the Adviser for certain clerical, legal, accounting, administrative and other services. In addition, the contractual management fee does not reflect any advisory fee waiver or expense cap that would effectively reduce the actual management fee. |
12 | | Except for asset (size) comparability, Lipper uses the same criteria for selecting an EG when selecting an EU. Unlike the EG, the EU allows for the same adviser to be represented by more than just one fund. |
13 | | Most recently completed fiscal year end Class A total expense ratio. |
32
| | |
| | AllianceBernstein Variable Products Series Fund |
In addition to the Adviser’s direct profits from managing the Portfolio, certain of the Adviser’s affiliates have business relationships with the Portfolio and may earn a profit from providing other services to the Portfolio. The courts have referred to this type of business opportunity as “fall-out benefits” to the Adviser and indicated that such benefits should be factored into the evaluation of the total relationship between the Portfolio and the Adviser. Neither case law nor common business practice precludes the Adviser’s affiliates from earning a reasonable profit on this type of relationship provided the affiliates’ charges and services are competitive. These affiliates provide transfer agent, distribution and brokerage related services to the Portfolio and receive transfer agent fees, Rule 12b-1 payments, and brokerage commissions. In addition, the Adviser benefits from soft dollar arrangements which offset expenses the Adviser would otherwise incur.
The Portfolio has adopted a distribution plan for Class B shares pursuant to Rule 12b-1 under the 40 Act. Under the distribution plan, the Portfolio pays distribution and servicing fees to its principal underwriter, AllianceBernstein Investments, Inc. (“ABI”), the Portfolio’s distributor and an affiliate of the Adviser, at an annual rate of up to 0.50% of the Portfolio’s average daily net assets attributable to Class B shares. The current annual rate that the Portfolio pays to ABI for 12b-1 fees is 0.25%. During the fiscal year ended December 31, 2013, ABI received $374,964 in Rule 12b-1 fees.
During the fiscal year ended December 31, 2013, the Adviser incurred distribution expenses in the amount of $895,802 in connection with activities primarily intended to result in the sale of the Portfolio’s Class B shares. This expense amount incurred by ABI is partially offset by the 12b-1 fees paid by the Portfolio.
Financial intermediaries, such as insurers, market and sell shares of the Portfolio and typically receive compensation from ABI, the Advisers and/or the Portfolio for selling shares of the Portfolio. These financial intermediaries receive compensation in any or all of the following forms: 12b-1 fees, defrayal of costs for educational seminars and training, additional distribution support, recordkeeping and/or administrative services. Payments related to providing contract-holder recordkeeping and/or administrative services will generally not exceed 0.35% of the average daily net assets of the Portfolio attributable to the relevant intermediary over the year. With respect to the Fund, which includes the Portfolio and other Portfolios of the Fund not discussed in this summary, ABI paid approximately $600,000 in 2013 and expects to pay approximately $600,000 in 2014 for educational support and distribution assistance (revenue sharing payments).
The transfer agent of the Portfolio is AllianceBernstein Investor Services, Inc. (“ABIS”). During the most recently completed fiscal year, ABIS received a fee of $1,385 from the Portfolio.14
The Portfolio did not effect brokerage transactions and pay commissions through the Adviser’s affiliate, Sanford C. Bernstein & Co., LLC (“SCB & Co.”) nor its U.K. affiliate, Sanford C. Bernstein Limited (“SCB Ltd.”), collectively “SCB,” during the Portfolio’s most recently completed fiscal year. The Adviser represented that SCB’s profitability from business conducted in the future with the Portfolio would be comparable to the profitability of SCB’s dealings with other similar third party clients. In the ordinary course of business, SCB receives and pays liquidity rebates from electronic communications networks (“ECNs”) derived from trading for its clients. These credits and charges are not being passed onto any SCB client. The Adviser also receives certain soft dollar benefits from brokers that execute agency trades for the Portfolio and other clients. These soft dollar benefits reduce the Adviser’s cost of doing business and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that economies of scale are being shared with shareholders through pricing to scale, breakpoints, fee reductions/waivers and enhancement to services.
In May 2012, an independent consultant, retained by the Senior Officer, provided the Board of Directors information on the Adviser’s firm-wide average costs from 2005 through 2011 and the potential economies of scale. The independent consultant noted that from 2005 through 2007 the Adviser experienced significant growth in assets under management (“AUM”). During this period, operating expenses increased, in part to keep up with growth, and in part reflecting market returns. However, from 2008 through the first quarter of 2009, AUM rapidly and significantly decreased due to declines in market value and client withdrawals. When AUM rapidly decreased, some operating expenses categories, including base compensation and office space, adjusted more slowly during this period, resulting in an increase in average costs. Since 2009, AUM has experienced less significant changes. The independent consultant noted that changes in operating expenses reflect changes in business composition and business practices in response to changes in financial markets. Finally, the independent consultant concluded that the increase in average cost and the decline in net operating margin across the Adviser since late 2008 are inconsistent with the view that there are currently reductions in average costs due to economics of scale that can be shared with the AllianceBernstein Mutual Funds managed by the Adviser through lower fees.
14 | | The Fund (which includes the Portfolio and other Portfolios of the Fund) paid ABIS a flat fee of $18,000 in 2013. |
33
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VALUE PORTFOLIO | | |
SENIOR OFFICER FEE EVALUATION | | |
(continued) | | AllianceBernstein Variable Products Series Fund |
Previously in February 2008, the independent consultant provided the Board of Directors an update of the Deli study on advisory fees and various fund characteristics.15,16 The independent consultant first reiterated the results of his previous two dimensional comparison analysis (fund size and family size) with the Board of Directors.17 The independent consultant then discussed the results of the regression model that was utilized to study the effects of various factors on advisory fees. The regression model output indicated that the bulk of the variation in fees predicted were explained by various factors, but substantially by fund AUM, family AUM, index fund indicator and investment style. The independent consultant also compared the advisory fees of the AllianceBernstein Mutual Funds to similar funds managed by 19 other large asset managers, regardless of the fund size and each Adviser’s proportion of mutual fund assets to non-mutual fund assets.
VI. NATURE AND QUALITY OF THE ADVISER’S SERVICES, INCLUDING THE PERFORMANCE OF THE PORTFOLIO
With assets under management of approximately $454 billion as of March 31, 2014, the Adviser has the investment experience to manage and provide non-investment services (described in Section I) to the Portfolio.
The information prepared by Lipper shows the 1, 3, 5 and 10 year performance returns and rankings of the Portfolio18 relative to its Lipper Performance Group (“PG”) and Lipper Performance Universe (“PU”)19 for the periods ended February 28, 2014.20
| | | | | | | | | | | | | | | | | | | | |
| | Portfolio (%) | | | PG Median (%) | | | PU Median (%) | | | PG Rank | | | PU Rank | |
Value Portfolio | | | | | | | | | | | | | | | | | | | | |
1 year | | | 27.39 | | | | 24.40 | | | | 23.64 | | | | 3/12 | | | | 9/50 | |
3 year | | | 12.92 | | | | 12.70 | | | | 12.91 | | | | 4/11 | | | | 22/44 | |
5 year | | | 21.89 | | | | 21.81 | | | | 21.89 | | | | 5/10 | | | | 21/42 | |
10 year | | | 4.98 | | | | 6.78 | | | | 6.86 | | | | 8/9 | | | | 29/30 | |
15 | | The Deli study, originally published in 2002 based on 1997 data and updated for the February 2008 Presentation, may be of diminished value due to the age of the data used in the presentation and the changes experienced in the industry over the four years. |
16 | | As mentioned previously, the Supreme Court cautioned against mutual fund fee comparisons without careful scrutiny since the fees may not be the product of negotiations conducted at arm’s length. See Jones v. Harris at 1429. |
17 | | The two dimensional analysis showed patterns of lower advisory fees for funds with larger asset sizes and funds from larger family sizes compared to funds with smaller asset sizes and funds from smaller family sizes, which according to the independent consultant is indicative of a sharing of economis of scale and scope. However, in less liquid and active markets, such is not the case, as the empirical analysis showed potential for diseconomies of scale in those markets. The empirical analysis also showed diminishing economies of scale and scope as funds surpassed a certain high level of assets. |
18 | | The performance rankings are for the Class A shares of the Portfolio. The Portfolio’s performance returns shown were provided by Lipper. |
19 | | The Portfolio’s PG is identical to the Portfolio’s respective EG. The Portfolio’s PU is not identical to the Portfolio’s EU as the criteria for including/excluding a fund from a PU is somewhat different from that of an EU. |
20 | | Lipper investment classification/objective dictates the PG and PU throughout the life of the fund even if a fund had a different investment classification/objective at a different point in time. |
34
| | |
| | AllianceBernstein Variable Products Series Fund |
Set forth below are the 1, 3, 5 and 10 year and since inception performance returns of the Portfolio (in bold)21 versus its benchmark.22 Portfolio and benchmark volatility and reward-to-variability ratio (“Sharpe Ratio”) information is also shown.23
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Periods Ending February 28, 2014 Annualized Performance | |
| | 1 Year (%) | | | 3 Year (%) | | | 5 Year (%) | | | 10 Year (%) | | | Since Inception (%) | | | Annualized | | | Risk Period (Year) | |
| | | | | | | | | | | | | |
| | | | | | | Volatility (%) | | | Sharpe (%) | | |
Value Portfolio | | | 27.39 | | | | 12.92 | | | | 21.89 | | | | 4.98 | | | | 7.88 | | | | 16.33 | | | | 0.28 | | | | 10 | |
Russell 1000 Value Index | | | 23.44 | | | | 14.05 | | | | 23.18 | | | | 7.24 | | | | 9.70 | | | | 15.52 | | | | 0.42 | | | | 10 | |
Inception Date: July 22, 2002 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CONCLUSION:
Based on the factors discussed above the Senior Officer’s conclusion is that the proposed advisory fee for the Portfolio is reasonable and within the range of what would have been negotiated at arm’s-length in light of all the surrounding circumstances. This conclusion in respect of the Portfolio is based on an evaluation of all of these factors and no single factor was dispositive.
Dated: June 5, 2014
21 | | The performance returns and risk measures shown in the table are for the Class A shares of the Portfolio. |
22 | | The Adviser provided Portfolio and benchmark performance return information for periods through February 28, 2013. |
23 | | Portfolio and benchmark volatility and Sharpe Ratio information was obtained through Lipper LANA, a database maintained by Lipper. Volatility is a statistical measure of the tendency of a market price or yield to vary over time. The Sharpe Ratio is a risk adjusted measure of return that divides a portfolio’s return in excess of the riskless return by the portfolio’s standard deviation. A portfolio with a greater volatility would be viewed as more risky than a portfolio with equivalent performance but lower volatility; for that reason, a greater return would be demanded for the more risky portfolio. A portfolio with a higher Sharpe Ratio would be viewed as better performing than a portfolio with a lower Sharpe Ratio. |
35
VPS-VAL-0151-1214
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant’s code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant’s Board of Directors has determined that independent directors William H. Foulk, Jr and Garry L. Moody. qualify as audit committee financial experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the independent registered public accounting firm Ernst & Young LLP, for the Fund’s last two fiscal years for professional services rendered for: (i) the audit of the Fund’s annual financial statements included in the Fund’s annual report to stockholders; (ii) assurance and related services that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under (i), which include multi-class distribution testing, advice and education on accounting and auditing issues, and consent letters; and (iii) tax compliance, tax advice and tax return preparation.
| | | | | | | | | | | | | | | | |
| | | | | Audit Fees | | | Audit-Related Fees | | | Tax Fees | |
AllianceBernstein Balanced Wealth Strategy Portfolio | | | 2013 | | | | 45,500 | | | | — | | | | 25,662 | |
| | | 2014 | | | | 68,071 | | | | — | | | | 31,211 | |
AllianceBernstein Global Thematic Growth Portfolio | | | 2013 | | | | 27,500 | | | | — | | | | 18,348 | |
| | | 2014 | | | | 39,530 | | | | — | | | | 24,602 | |
AllianceBernstein Growth Portfolio | | | 2013 | | | | 26,000 | | | | — | | | | 10,563 | |
| | | 2014 | | | | 29,609 | | | | — | | | | 10,737 | |
AllianceBernstein Growth and Income Portfolio | | | 2013 | | | | 26,000 | | | | — | | | | 11,148 | |
| | | 2014 | | | | 29,609 | | | | — | | | | 11,322 | |
AllianceBernstein Intermediate Bond Portfolio | | | 2013 | | | | 40,000 | | | | — | | | | 9,725 | |
| | | 2014 | | | | 64,103 | | | | — | | | | 9,738 | |
AllianceBernstein International Growth Portfolio | | | 2013 | | | | 27,500 | | | | — | | | | 19,405 | |
| | | 2014 | | | | 39,530 | | | | — | | | | 24,604 | |
AllianceBernstein International Value Portfolio | | | 2013 | | | | 27,500 | | | | — | | | | 17,180 | |
| | | 2014 | | | | 39,530 | | | | — | | | | 24,634 | |
AllianceBernstein Large Cap Growth Portfolio | | | 2013 | | | | 26,000 | | | | — | | | | 10,563 | |
| | | 2014 | | | | 29,609 | | | | — | | | | 10,737 | |
AllianceBernstein Real Estate Investment Portfolio | | | 2013 | | | | 27,500 | | | | — | | | | 18,445 | |
| | | 2014 | | | | 33,578 | | | | — | | | | 18,619 | |
AllianceBernstein Small Cap Growth Portfolio | | | 2013 | | | | 26,000 | | | | — | | | | 10,479 | |
| | | 2014 | | | | 29,609 | | | | — | | | | 9,733 | |
AllianceBernstein Small-Mid Cap Value Portfolio | | | 2013 | | | | 26,000 | | | | — | | | | 16,744 | |
| | | 2014 | | | | 33,578 | | | | — | | | | 16,918 | |
AllianceBernstein Value Portfolio | | | 2013 | | | | 26,000 | | | | — | | | | 10,479 | |
| | | 2014 | | | | 29,609 | | | | — | | | | 10,653 | |
AllianceBernstein Dynamic Asset Allocation Portfolio | | | 2013 | | | | 45,500 | | | | — | | | | 18,445 | |
| | | 2014 | | | | 80,281 | | | | — | | | | 18,619 | |
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or after May 6, 2003, the Fund’s Audit Committee policies and procedures require the pre-approval of all audit and non-audit services provided to the Fund by the Fund’s independent registered public accounting firm. The Fund’s Audit Committee policies and procedures also require pre-approval of all audit and non-audit services provided to the Adviser and Service Affiliates to the extent that these services are directly related to the operations or financial reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in the table under Item 4 (a) – (c) are for services pre-approved by the Fund’s Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to the Fund, the Fund’s Adviser and entities that control, are controlled by or under common control with the Adviser that provide ongoing services to the Fund:
| | | | | | | | | | | | |
| | | | | All Fees for Non-Audit Services Provided to the Portfolio, the Adviser and Service Affiliates | | | Total Amount of Foregoing Column Pre- approved by the Audit Committee (Portion Comprised of Audit Related Fees) (Portion Comprised of Tax Fees) | |
AllianceBernstein Balanced Wealth Strategy Portfolio | | | 2013 | | | $ | 268,609 | | | | 25,662 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (25,662 | ) |
| | | 2014 | | | $ | 374,394 | | | | 31,211 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (31,211 | ) |
AllianceBernstein Global Thematic Growth Portfolio | | | 2013 | | | $ | 275,923 | | | | 18,348 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (18,348 | ) |
| | | 2014 | | | $ | 381,003 | | | | 24,602 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (24,602 | ) |
AllianceBernstein Growth Portfolio | | | 2013 | | | $ | 283,708 | | | | 10,563 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,563 | ) |
| | | 2014 | | | $ | 394,868 | | | | 10,737 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,737 | ) |
AllianceBernstein Growth and Income Portfolio | | | 2013 | | | $ | 283,123 | | | | 11,148 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (11,148 | ) |
| | | 2014 | | | $ | 394,283 | | | | 11,322 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (11,322 | ) |
AllianceBernstein Intermediate Bond Portfolio | | | 2013 | | | $ | 284,546 | | | | 9,725 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (9,725 | ) |
| | | 2014 | | | $ | 395,867 | | | | 9,738 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (9,738 | ) |
AllianceBernstein International Growth Portfolio | | | 2013 | | | $ | 274,866 | | | | 19,405 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (19,405 | ) |
| | | 2014 | | | $ | 381,001 | | | | 24,604 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (24,604 | ) |
AllianceBernstein International Value Portfolio | | | 2013 | | | $ | 277,091 | | | | 17,180 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (17,180 | ) |
| | | 2014 | | | $ | 380,971 | | | | 24,634 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (24,634 | ) |
AllianceBernstein Large Cap Growth Portfolio | | | 2013 | | | $ | 283,708 | | | | 10,563 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,563 | ) |
| | | 2014 | | | $ | 394,868 | | | | 10,737 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,737 | ) |
AllianceBernstein Real Estate Investment Portfolio | | | 2013 | | | $ | 275,826 | | | | 18,445 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (18,445 | ) |
| | | | | | | | | | | | |
| | | 2014 | | | $ | 386,986 | | | | 18,619 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (18,619 | ) |
AllianceBernstein Small Cap Growth Portfolio | | | 2013 | | | $ | 283,792 | | | | 10,479 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,479 | ) |
| | | 2014 | | | $ | 395,872 | | | | 9,733 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (9,733 | ) |
AllianceBernstein Small-Mid Cap Value Portfolio | | | 2013 | | | $ | 277,527 | | | | 16,744 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (16,744 | ) |
| | | 2014 | | | $ | 388,687 | | | | 16,918 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (16,918 | ) |
AllianceBernstein Value Portfolio | | | 2013 | | | $ | 283,792 | | | | 10,479 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,479 | ) |
| | | 2014 | | | $ | 394,952 | | | | 10,653 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,653 | ) |
AllianceBernstein Dynamic Asset Allocation Portfolio | | | 2013 | | | $ | 275,826 | | | | 18,445 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (18,445 | ) |
| | | 2014 | | | $ | 386,986 | | | | 18,619 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (18,619 | ) |
(h) The Audit Committee of the Fund has considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund’s independent registered public accounting firm to the Adviser and Service Affiliates is compatible with maintaining the auditor’s independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. | SCHEDULE OF INVESTMENTS. |
Please see Schedule of Investments contained in the Report to Shareholders included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective at the reasonable assurance level based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
(b) There were no significant changes in the registrant’s internal controls over financial reporting that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
| | |
EXHIBIT NO. | | DESCRIPTION OF EXHIBIT |
| |
12 (a) (1) | | Code of ethics that is subject to the disclosure of Item 2 hereof |
| |
12 (b) (1) | | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
12 (b) (2) | | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
12 (c) | | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Variable Products Series Fund, Inc.
| | |
By: | | /s/ Robert M. Keith |
| | Robert M. Keith |
| | President |
| |
Date: | | February 10, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
By: | | /s/ Robert M. Keith |
| | Robert M. Keith |
| | President |
| |
Date: | | February 10, 2015 |
| |
By: | | /s/ Joseph J. Mantineo |
| | Joseph J. Mantineo |
| | Treasurer and Chief Financial Officer |
| |
Date: | | February 10, 2015 |