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
AB 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, 2020
Date of reporting period: December 31, 2020
| ITEM 1. | REPORTS TO STOCKHOLDERS. |
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS
SERIES FUND, INC.
| + | | BALANCED WEALTH STRATEGY PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| BALANCED WEALTH STRATEGY | | |
| |
| PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Balanced Wealth Strategy Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to maximize total return consistent with the Adviser’s determination of reasonable risk. The Portfolio invests in a portfolio of equity and fixed-income 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 fixed-income securities and the broad diversification of their equity risk across styles, capitalization ranges and geographic regions. Under normal circumstances, the Portfolio invests at least 25% of its total assets in equity securities and at least 25% of its total assets in fixed-income securities with a goal of providing moderate upside potential without excessive volatility. The Portfolio also seeks exposure to real assets by investing in real estate-related equity securities (including real estate investment trusts “REITs”), natural resource equity securities and inflation-sensitive equity securities, which are equity securities of companies that the Adviser believes maintain or grow margins in rising inflation environments, including equity securities of utilities and infrastructure-related companies (“inflation-sensitive equities”). The Portfolio pursues a global strategy, typically investing in securities of issuers located in the United States and in other countries throughout the world, including emerging-market countries.
The Adviser expects that the Portfolio will normally invest a greater percentage of its total assets in equity securities than in fixed-income securities, and will generally invest in equity securities both directly and through underlying investment companies advised by the Adviser (“Underlying Portfolios”). A significant portion of the Portfolio’s assets are expected to be invested directly in US large-cap equity securities, primarily common stocks, in accordance with the Adviser’s US Strategic Equities investment strategy (“US Strategic Equities”). Under US Strategic Equities, portfolio managers of the Adviser that specialize in various investment disciplines identify high-conviction large-cap equity securities based on their fundamental investment research for potential investment by the Portfolio. These securities are then assessed in terms of both this fundamental research and quantitative analysis in creating the equity portion of the Portfolio’s portfolio. In applying the quantitative analysis, the Adviser considers a number of metrics that historically have provided some indication of favorable future returns, including metrics related to valuation, quality, investor behavior and corporate behavior.
In addition, the Portfolio seeks to achieve exposure to international large-cap equity securities through investments in other registered investment companies advised by the Adviser, which may include International Strategic Equities Portfolio of Bernstein Fund, Inc. (“Bernstein International Strategic Equities Portfolio”). Bernstein International Strategic Equities Portfolio focuses on investing in non-US large-cap and mid-cap equity securities. Bernstein International Strategic Equities Portfolio follows a strategy similar to US Strategic Equities, but in the international context. The Portfolio also invests in other Underlying Portfolios to efficiently gain exposure to certain other types of equity securities, including small- and mid-cap and emerging-market equity securities. The Adviser selects an Underlying Portfolio based on the segment of the equity market to which the Underlying Portfolio provides exposure, its investment philosophy, and how it complements and diversifies the Portfolio’s overall portfolio.
In selecting fixed-income investments, the Adviser may draw on the capabilities of separate investment teams that specialize in different areas that are generally defined by the maturity of the debt securities and/or their ratings, and which may include subspecialties (such as inflation-indexed securities). These fixed-income teams draw on the resources and expertise of the Adviser’s internal fixed-income research staff, which includes over 50 dedicated fixed-income research analysts and economists. The Portfolio’s fixed-income securities will primarily be investment-grade debt securities, but are expected to include lower-rated securities (“junk bonds”) and preferred stock.
The Portfolio expects to enter into derivative transactions, such as options, futures contracts, forwards and swaps. Derivatives may provide a more efficient and economical exposure to market segments than direct investments, and may also be a more efficient way to alter the Portfolio’s exposure. The Portfolio may, for example, use credit default, interest rate and total return swaps to establish exposure to the fixed-income markets or particular fixed-income securities and, as noted below, may use currency derivatives to hedge foreign currency exposure.
The Adviser may employ currency hedging strategies in the Portfolio or the Underlying Portfolios, including the use of currency-related derivatives, to seek to reduce currency risk in the Portfolio or the Underlying Portfolios, but it is not required to do so. The Adviser will generally
1
| | |
| |
| | | AB Variable Products Series Fund |
employ currency-related hedging strategies more frequently in the fixed-income portion of the Portfolio than in the equity portion.
INVESTMENT RESULTS
The table on page 5 shows the Portfolio’s performance compared to its primary benchmark, the Morgan Stanley Capital International All Country World Index (“MSCI ACWI”) (net), and the Bloomberg Barclays Global Aggregate Bond Index (USD hedged), for the one-, five- and 10-year periods ended December 31, 2020.
For the annual period, all share classes of the Portfolio underperformed the primary benchmark, but outperformed the Bloomberg Barclays Global Aggregate Bond Index. The Portfolio’s more diversified approach, which balances exposures to equities, bonds, commodities and alternative strategies, underperformed the all-equity benchmark. During the period, equities, fixed-income assets and alternative strategies contributed to absolute performance. Security selection within equities and fixed income detracted from performance, while selection within alternative strategies was positive.
During the annual period, the Portfolio utilized derivatives for hedging and investment purposes, including futures and written swaptions, which added to absolute returns, while forwards, credit default swaps, interest rate swaps and inflation Consumer Price Index swaps detracted.
MARKET REVIEW AND INVESTMENT STRATEGY
US and international stocks recorded positive returns during the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
Global fixed-income market returns were positive yet volatile over the annual period. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, setting the stage for a rebound in risk assets following the initial sell-off in March. Government bonds rallied as interest rates were slashed. Risk assets began to rally significantly in November when positive vaccine news extended the credit rally. Developed-market and emerging-market investment-grade corporate bonds and commercial mortgage-backed securities led gains as investors searched for higher yields in a period of falling interest rates. Global developed-market high-yield corporate bonds also had strong returns, particularly in the US. Agency mortgage-backed securities, along with emerging-market local-currency debt and high-yield hard-currency sovereign bonds, had positive returns but trailed global treasuries. The US dollar declined against all major developed-market currencies and was mixed against emerging-market currencies. Brent crude oil prices were volatile and fell about 21% due to an uncertain oil industry outlook. Copper prices advanced more than 25%, and gold rose 24% as a perceived inflation hedge.
The Portfolio’s Senior Investment Management Team seeks improved equity risk control by utilizing a blend of US, emerging- and international-market equities as well as diversifiers in the form of real estate, natural resources and pricing power equities. The Portfolio also features a global fixed-income component to benefit from international bond diversification and the low correlation of fixed income and equities. The blended equity and fixed-income exposures, combined with an emphasis on companies with historical and projected stable earnings and higher profitability, offer the potential to achieve higher risk-adjusted returns.
2
| | |
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
All indices are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI ACWI (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets. The Bloomberg Barclays Global Aggregate Bond Index (USD hedged) represents the performance of the global investment-grade developed fixed-income markets, hedged to the US dollar. 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. Net returns reflect the reinvestment of dividends after deduction of non-US withholding tax. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Allocation Risk: The allocation of investments among the different investment styles, such as growth or value, equity or debt securities, or US or non-US 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.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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, and because these investments may be 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 the Portfolio’s returns.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing 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 and accrued interest. 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 and negative perceptions of the junk bond market generally, and may be more difficult to trade than other types of securities.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Investment in Other Investment Companies Risk: As with other investments, investments in other investment companies are subject to market and selection risk. In addition, Contractholders invested in the Portfolio bear both their proportionate share of expenses in the Portfolio (including management fees) and, indirectly, the expenses of the investment companies in which the Portfolio invests (to the extent these expenses are not waived or reimbursed by the Adviser).
(Disclosures, Risks and Note About Historical Performance continued on next page)
3
| | |
| | |
| DISCLOSURES AND RISKS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Real Assets Risk: The Portfolio’s investments in securities linked to real assets involve significant risks, including financial, operating, and competitive risks. Investments in securities linked to real assets expose the Portfolio to adverse macroeconomic conditions, such as a rise in interest rates or a downturn in the economy in which the asset is located. Changes in inflation rates or in the market’s inflation expectations may adversely affect the market value of inflation-sensitive equities. 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 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.
Active Trading Risk: The Portfolio expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate is expected to exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Portfolio’s return.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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.
Effective May 1, 2018, the Portfolio amended its principal strategies by eliminating the static targets for allocation of investments among asset classes, changing the securities selection strategies used for the equity portion of the Portfolio, and broadening the types of real asset securities in which the Portfolio will invest. The performance shown in the report for periods prior to May 1, 2018 is based on the Portfolio’s prior principal strategies and may not be representative of the Portfolio’s performance under its current principal strategies.
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) 227 4618. 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.
4
| | |
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARKS | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Balanced Wealth Strategy Portfolio Class A | | | 9.41% | | | | 8.09% | | | | 7.56% | |
| | | |
| Balanced Wealth Strategy Portfolio Class B | | | 9.25% | | | | 7.85% | | | | 7.30% | |
| | | |
| Primary Benchmark: MSCI ACWI (net) | | | 16.25% | | | | 12.26% | | | | 9.13% | |
| | | |
| Bloomberg Barclays Global Aggregate Bond Index (USD hedged) | | | 5.58% | | | | 4.49% | | | | 4.18% | |
1 Average annual returns. | | | | | | | | | | | | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.97% and 1.22% 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 exclusive of interest expense to 0.76% and 1.01% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, and may be extended by the Adviser for additional one-year terms. 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 OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Balanced Wealth Strategy Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on pages 3-4.
5
| | |
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | | | Total
Expenses Paid
During Period+ | | | Total
Annualized
Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,153.90 | | | $ | 2.98 | | | | 0.55 | % | | $ | 4.17 | | | | 0.77 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,022.37 | | | $ | 2.80 | | | | 0.55 | % | | $ | 3.91 | | | | 0.77 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,153.00 | | | $ | 4.33 | | | | 0.80 | % | | $ | 5.52 | | | | 1.02 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.11 | | | $ | 4.06 | | | | 0.80 | % | | $ | 5.18 | | | | 1.02 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| + | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
6
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| SECURITY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Bernstein Fund, Inc.—International Strategic Equities Portfolio—Class Z | | $ | 42,917,274 | | | | 17.6 | % |
Bernstein Fund, Inc.—International Small Cap Portfolio—Class Z | | | 8,409,829 | | | | 3.5 | |
Microsoft Corp. | | | 5,297,155 | | | | 2.2 | |
Sanford C. Bernstein Fund, Inc.—Emerging Markets Portfolio—Class Z | | | 3,964,568 | | | | 1.6 | |
Alphabet, Inc.—Class C | | | 3,799,828 | | | | 1.6 | |
Apple, Inc. | | | 3,775,030 | | | | 1.5 | |
AB Trust—AB Discovery Value Fund—Class Z | | | 3,151,209 | | | | 1.3 | |
Bernstein Fund, Inc.—Small Cap Core Portfolio—Class Z | | | 3,104,771 | | | | 1.3 | |
AB Discovery Growth Fund, Inc.—Class Z | | | 3,073,324 | | | | 1.3 | |
Facebook, Inc.—Class A | | | 2,799,344 | | | | 1.1 | |
| | | | | | | | | |
| | | $ | 80,292,332 | | | | 33.0 | % |
SECURITY TYPE BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECURITY TYPE | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Common Stocks | | $ | 98,736,230 | | | | 40.4 | % |
Investment Companies | | | 64,620,975 | | | | 26.4 | |
Governments—Treasuries | | | 29,076,965 | | | | 11.9 | |
Corporates—Investment Grade | | | 22,792,366 | | | | 9.3 | |
Corporates—Non-Investment Grade | | | 5,221,377 | | | | 2.1 | |
Quasi-Sovereigns | | | 4,419,286 | | | | 1.8 | |
Collateralized Mortgage Obligations | | | 3,785,675 | | | | 1.6 | |
Mortgage Pass-Throughs | | | 3,765,978 | | | | 1.5 | |
Commercial Mortgage-Backed Securities | | | 2,093,375 | | | | 0.9 | |
Emerging Markets—Corporate Bonds | | | 927,177 | | | | 0.4 | |
Collateralized Loan Obligations | | | 868,963 | | | | 0.4 | |
Governments—Sovereign Bonds | | | 717,277 | | | | 0.3 | |
Emerging Markets—Sovereigns | | | 709,046 | | | | 0.3 | |
Other3 | | | 1,321,012 | | | | 0.5 | |
Short-Term Investments | | | 5,356,003 | | | | 2.2 | |
| | | | | | | | | |
Total Investments | | $ | 244,411,705 | | | | 100.0 | % |
| 1 | | Long-term investments. Table shown includes investments of Underlying Portfolios. |
| 2 | | The Portfolio’s security type breakdown is expressed as a percentage of total investments 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). Table shown includes investments of Underlying Portfolios. |
| 3 | | “Other” represents less than 0.2% weightings in the following security types: Asset-Backed Securities, Covered Bonds, Emerging Markets—Treasuries and Governments—Sovereign Agencies. |
7
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| COUNTRY BREAKDOWN1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
United States | | $ | 173,238,750 | | | | 70.9 | % |
Japan | | | 10,631,602 | | | | 4.3 | |
United Kingdom | | | 6,654,392 | | | | 2.7 | |
China | | | 5,803,880 | | | | 2.4 | |
Australia | | | 5,678,242 | | | | 2.3 | |
Canada | | | 5,068,661 | | | | 2.1 | |
Italy | | | 3,189,197 | | | | 1.3 | |
Switzerland | | | 2,862,351 | | | | 1.2 | |
France | | | 2,832,149 | | | | 1.2 | |
Germany | | | 2,674,319 | | | | 1.1 | |
Netherlands | | | 2,585,257 | | | | 1.1 | |
Spain | | | 2,064,490 | | | | 0.8 | |
Ireland | | | 2,025,997 | | | | 0.8 | |
Other | | | 13,746,415 | | | | 5.6 | |
Short-Term Investments | | | 5,356,003 | | | | 2.2 | |
| | | | | | | | | |
Total Investments | | $ | 244,411,705 | | | | 100.0 | % |
| 1 | | All data are as of December 31, 2020. The Portfolio’s country breakdown is expressed as a percentage of total investments (excluding security lending collateral) and may vary over time. Table shown includes investments of Underlying Portfolios. “Other” country weightings represent 0.6% or less in the following: Austria, Belgium, Brazil, Chile, Colombia, Denmark, Finland, Greece, Hong Kong, India, Indonesia, Israel, Ivory Coast, Jersey (Channel Islands), Luxembourg, Malaysia, Mexico, New Zealand, Nigeria, Norway, Panama, Peru, Portugal, Russia, Saudi Arabia, Singapore, South Africa, Sweden, Turkey, United Arab Emirates and United Republic of Tanzania. |
8
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–40.5% | | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–9.4% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.0% | | | | | | | | |
Telefonaktiebolaget LM Ericsson–Class B | | | 1,571 | | | $ | 18,688 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.3% | | | | | | | | |
Arrow Electronics, Inc.(a) | | | 874 | | | | 85,040 | |
CDW Corp./DE | | | 4,758 | | | | 627,057 | |
| | | | | | | | |
| | | | | | | 712,097 | |
| | | | | | | | |
IT SERVICES–2.1% | | | | | | | | |
Accenture PLC–Class A | | | 151 | | | | 39,443 | |
Atos SE(a) | | | 347 | | | | 31,686 | |
Automatic Data Processing, Inc. | | | 4,163 | | | | 733,520 | |
Booz Allen Hamilton Holding Corp. | | | 4,699 | | | | 409,659 | |
EPAM Systems, Inc.(a) | | | 236 | | | | 84,571 | |
Genpact Ltd. | | | 13,178 | | | | 545,042 | |
International Business Machines Corp. | | | 168 | | | | 21,148 | |
Mastercard, Inc.–Class A | | | 204 | | | | 72,816 | |
PayPal Holdings, Inc.(a) | | | 4,024 | | | | 942,421 | |
Shopify, Inc.–Class A(a) | | | 49 | | | | 55,329 | |
Visa, Inc.–Class A | | | 10,123 | | | | 2,214,204 | |
| | | | | | | | |
| | | | | | | 5,149,839 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–2.1% | | | | | | | | |
Advanced Micro Devices, Inc.(a) | | | 284 | | | | 26,046 | |
Applied Materials, Inc. | | | 1,108 | | | | 95,620 | |
ASML Holding NV | | | 139 | | | | 67,301 | |
Lam Research Corp. | | | 32 | | | | 15,113 | |
NVIDIA Corp. | | | 1,479 | | | | 772,334 | |
NXP Semiconductors NV | | | 6,034 | | | | 959,466 | |
QUALCOMM, Inc. | | | 9,188 | | | | 1,399,699 | |
STMicroelectronics NV | | | 1,641 | | | | 60,710 | |
Teradyne, Inc. | | | 194 | | | | 23,259 | |
Texas Instruments, Inc. | | | 6,886 | | | | 1,130,199 | |
Xilinx, Inc. | | | 4,488 | | | | 636,264 | |
| | | | | | | | |
| | | | | | | 5,186,011 | |
| | | | | | | | |
SOFTWARE–3.3% | | | | | | | | |
Adobe, Inc.(a) | | | 1,097 | | | | 548,632 | |
Autodesk, Inc.(a) | | | 22 | | | | 6,717 | |
Cadence Design Systems, Inc.(a) | | | 742 | | | | 101,231 | |
Citrix Systems, Inc. | | | 4,648 | | | | 604,705 | |
Constellation Software, Inc./Canada | | | 28 | | | | 36,359 | |
Dropbox, Inc.–Class A(a) | | | 1,871 | | | | 41,517 | |
Fair Isaac Corp.(a) | | | 67 | | | | 34,240 | |
Intuit, Inc. | | | 65 | | | | 24,690 | |
Microsoft Corp. | | | 23,816 | | | | 5,297,155 | |
| | | | | | | | |
Oracle Corp. | | | 13,182 | | | | 852,744 | |
ServiceNow, Inc.(a) | | | 188 | | | | 103,481 | |
Topicus.com, Inc.(a)(b)(c) | | | 52 | | | | 197 | |
Trend Micro, Inc./Japan | | | 800 | | | | 46,058 | |
VMware, Inc.–Class A(a)(d) | | | 2,741 | | | | 384,453 | |
WiseTech Global Ltd. | | | 151 | | | | 3,588 | |
Xero Ltd.(a) | | | 176 | | | | 19,976 | |
Zoom Video Communications, Inc.–Class A(a) | | | 35 | | | | 11,806 | |
| | | | | | | | |
| | | | | | | 8,117,549 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–1.6% | | | | | | | | |
Apple, Inc. | | | 28,450 | | | | 3,775,030 | |
| | | | | | | | |
| | | | | | | 22,959,214 | |
| | | | | | | | |
HEALTH CARE–4.9% | | | | | | | | |
BIOTECHNOLOGY–0.6% | | | | | | | | |
AbbVie, Inc. | | | 828 | | | | 88,720 | |
Amgen, Inc. | | | 100 | | | | 22,992 | |
Regeneron Pharmaceuticals, Inc.(a) | | | 805 | | | | 388,904 | |
Vertex Pharmaceuticals, Inc.(a) | | | 3,955 | | | | 934,724 | |
| | | | | | | | |
| | | | | | | 1,435,340 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–1.0% | | | | | | | | |
Align Technology, Inc.(a) | | | 67 | | | | 35,803 | |
Edwards Lifesciences Corp.(a) | | | 9,002 | | | | 821,253 | |
Medtronic PLC | | | 13,797 | | | | 1,616,181 | |
| | | | | | | | |
| | | | | | | 2,473,237 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–1.5% | | | | | | | | |
AmerisourceBergen Corp.–Class A | | | 681 | | | | 66,575 | |
Anthem, Inc. | | | 3,359 | | | | 1,078,541 | |
McKesson Corp. | | | 376 | | | | 65,394 | |
Molina Healthcare, Inc.(a) | | | 280 | | | | 59,550 | |
UnitedHealth Group, Inc. | | | 6,681 | | | | 2,342,893 | |
| | | | | | | | |
| | | | | | | 3,612,953 | |
| | | | | | | | |
HEALTH CARE TECHNOLOGY–0.0% | | | | | | | | |
Cerner Corp. | | | 1,009 | | | | 79,186 | |
Veeva Systems, Inc.–Class A(a) | | | 107 | | | | 29,131 | |
| | | | | | | | |
| | | | | | | 108,317 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–0.1% | | | | | | | | |
Bio-Rad Laboratories, Inc.–Class A(a) | | | 124 | | | | 72,284 | |
Lonza Group AG | | | 17 | | | | 10,951 | |
Mettler-Toledo International, Inc.(a) | | | 66 | | | | 75,219 | |
Sartorius Stedim Biotech | | | 119 | | | | 42,334 | |
Waters Corp.(a) | | | 91 | | | | 22,515 | |
| | | | | | | | |
| | | | | | | 223,303 | |
| | | | | | | | |
9
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
PHARMACEUTICALS–1.7% | | | | | | | | |
AstraZeneca PLC | | | 195 | | | $ | 19,444 | |
Eli Lilly & Co. | | | 539 | | | | 91,005 | |
Johnson & Johnson | | | 8,577 | | | | 1,349,848 | |
Merck & Co., Inc. | | | 641 | | | | 52,434 | |
Novo Nordisk A/S–Class B | | | 688 | | | | 47,994 | |
Roche Holding AG | | | 223 | | | | 77,671 | |
Roche Holding AG (Sponsored ADR) | | | 31,594 | | | | 1,385,081 | |
Takeda Pharmaceutical Co., Ltd. | | | 1,900 | | | | 68,760 | |
Zoetis, Inc. | | | 5,683 | | | | 940,536 | |
| | | | | | | | |
| | | | | | | 4,032,773 | |
| | | | | | | | |
| | | | | | | 11,885,923 | |
| | | | | | | | |
COMMUNICATION SERVICES–4.5% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–1.1% | | | | | | | | |
Comcast Corp.–Class A | | | 29,540 | | | | 1,547,896 | |
Telenor ASA | | | 1,727 | | | | 29,315 | |
Verizon Communications, Inc. | | | 17,313 | | | | 1,017,139 | |
| | | | | | | | |
| | | | | | | 2,594,350 | |
| | | | | | | | |
ENTERTAINMENT–0.6% | | | | | | | | |
Electronic Arts, Inc. | | | 9,007 | | | | 1,293,405 | |
Netflix, Inc.(a) | | | 240 | | | | 129,776 | |
Nintendo Co., Ltd. | | | 100 | | | | 64,194 | |
| | | | | | | | |
| | | | | | | 1,487,375 | |
| | | | | | | | |
INTERACTIVE MEDIA & SERVICES–2.8% | | | | | | | | |
Alphabet, Inc.–Class A(a) | | | 79 | | | | 138,458 | |
Alphabet, Inc.–Class C(a) | | | 2,169 | | | | 3,799,828 | |
Facebook, Inc.–Class A(a) | | | 10,248 | | | | 2,799,344 | |
| | | | | | | | |
| | | | | | | 6,737,630 | |
| | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–0.0% | | | | | | | | |
Softbank Corp. | | | 2,200 | | | | 27,614 | |
| | | | | | | | |
| | | | | | | 10,846,969 | |
| | | | | | | | |
REAL ESTATE–4.2% | | | | | | | | |
DIVERSIFIED REAL ESTATE ACTIVITIES–0.2% | | | | | | | | |
Mitsubishi Estate Co., Ltd. | | | 3,800 | | | | 61,077 | |
Mitsui Fudosan Co., Ltd. | | | 10,400 | | | | 217,771 | |
New World Development Co., Ltd. | | | 16,000 | | | | 74,438 | |
Sumitomo Realty & Development Co., Ltd. | | | 1,300 | | | | 40,135 | |
Sun Hung Kai Properties Ltd. | | | 11,000 | | | | 140,679 | |
UOL Group Ltd. | | | 7,700 | | | | 44,899 | |
| | | | | | | | |
| | | | | | | 578,999 | |
| | | | | | | | |
DIVERSIFIED REITS–0.3% | | | | | | | | |
Alexander & Baldwin, Inc. | | | 3,260 | | | | 56,007 | |
Armada Hoffler Properties, Inc. | | | 3,732 | | | | 41,873 | |
| | | | | | | | |
Broadstone Net Lease, Inc.–Class A | | | 1,660 | | | | 32,503 | |
Daiwa House REIT Investment Corp. | | | 14 | | | | 34,634 | |
Essential Properties Realty Trust, Inc. | | | 3,604 | | | | 76,405 | |
Fibra Uno Administracion SA de CV | | | 13,590 | | | | 15,373 | |
Gecina SA | | | 310 | | | | 48,205 | |
Hulic Reit, Inc. | | | 42 | | | | 62,708 | |
ICADE | | | 570 | | | | 43,825 | |
Land Securities Group PLC | | | 6,570 | | | | 60,680 | |
Merlin Properties Socimi SA | | | 7,690 | | | | 73,325 | |
Nomura Real Estate Master Fund, Inc. | | | 30 | | | | 42,931 | |
Stockland | | | 36,410 | | | | 117,552 | |
| | | | | | | | |
| | | | | | | 706,021 | |
| | | | | | | | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS)–1.3% | | | | | | | | |
American Campus Communities, Inc. | | | 13,008 | | | | 556,352 | |
American Tower Corp. | | | 15 | | | | 3,367 | |
Americold Realty Trust | | | 15,987 | | | | 596,795 | |
Mid-America Apartment Communities, Inc. | | | 8,259 | | | | 1,046,333 | |
Orix JREIT, Inc. | | | 10 | | | | 16,543 | |
Prologis, Inc. | | | 7,399 | | | | 737,384 | |
Scentre Group | | | 2,055 | | | | 4,414 | |
VICI Properties, Inc. | | | 2,049 | | | | 52,250 | |
Weyerhaeuser Co. | | | 1,809 | | | | 60,656 | |
| | | | | | | | |
| | | | | | | 3,074,094 | |
| | | | | | | | |
HEALTH CARE REITS–0.3% | | | | | | | | |
Assura PLC | | | 64,070 | | | | 67,432 | |
Medical Properties Trust, Inc. | | | 7,110 | | | | 154,927 | |
Omega Healthcare Investors, Inc. | | | 3,617 | | | | 131,370 | |
Physicians Realty Trust | | | 5,173 | | | | 92,079 | |
Welltower, Inc. | | | 3,310 | | | | 213,892 | |
| | | | | | | | |
| | | | | | | 659,700 | |
| | | | | | | | |
HOTEL & RESORT REITS–0.1% | | | | | | | | |
Japan Hotel REIT Investment Corp. | | | 35 | | | | 17,998 | |
RLJ Lodging Trust | | | 5,596 | | | | 79,183 | |
| | | | | | | | |
| | | | | | | 97,181 | |
| | | | | | | | |
INDUSTRIAL REITS–0.2% | | | | | | | | |
Ascendas Real Estate Investment Trust | | | 18,800 | | | | 42,440 | |
Dream Industrial Real Estate Investment Trust | | | 4,045 | | | | 41,788 | |
GLP J-Reit | | | 38 | | | | 59,964 | |
Industrial & Infrastructure Fund Investment Corp. | | | 30 | | | | 55,389 | |
Mitsui Fudosan Logistics Park, Inc. | | | 9 | | | | 45,645 | |
10
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Plymouth Industrial REIT, Inc. | | | 1,112 | | | $ | 16,680 | |
Rexford Industrial Realty, Inc. | | | 1,851 | | | | 90,903 | |
Segro PLC | | | 8,586 | | | | 111,410 | |
STAG Industrial, Inc. | | | 2,779 | | | | 87,038 | |
| | | | | | | | |
| | | | | | | 551,257 | |
| | | | | | | | |
OFFICE REITS–0.3% | | | | | | | | |
Alexandria Real Estate Equities, Inc. | | | 1,047 | | | | 186,596 | |
Allied Properties Real Estate Investment Trust | | | 1,685 | | | | 50,078 | |
alstria office REIT-AG | | | 2,390 | | | | 43,483 | |
Boston Properties, Inc. | | | 1,065 | | | | 100,675 | |
Cousins Properties, Inc. | | | 2,842 | | | | 95,207 | |
Covivio | | | 380 | | | | 34,870 | |
Daiwa Office Investment Corp. | | | 9 | | | | 57,218 | |
Derwent London PLC | | | 720 | | | | 30,599 | |
Japan Prime Realty Investment Corp. | | | 17 | | | | 56,388 | |
Japan Real Estate Investment Corp. | | | 7 | | | | 40,448 | |
Kilroy Realty Corp. | | | 1,339 | | | | 76,859 | |
Nippon Building Fund, Inc. | | | 6 | | | | 34,798 | |
True North Commercial Real Estate Investment Trust | | | 3,060 | | | | 15,169 | |
| | | | | | | | |
| | | | | | | 822,388 | |
| | | | | | | | |
REAL ESTATE DEVELOPMENT–0.1% | | | | | | | | |
CIFI Holdings Group Co., Ltd. | | | 38,000 | | | | 32,202 | |
CK Asset Holdings Ltd. | | | 8,000 | | | | 40,935 | |
Instone Real Estate Group AG(a)(e) | | | 2,115 | | | | 53,997 | |
| | | | | | | | |
| | | | | | | 127,134 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–0.0% | | | | | | | | |
CBRE Group, Inc.–Class A(a) | | | 471 | | | | 29,541 | |
FirstService Corp. | | | 90 | | | | 12,318 | |
| | | | | | | | |
| | | | | | | 41,859 | |
| | | | | | | | |
REAL ESTATE OPERATING COMPANIES–0.4% | | | | | | | | |
ADLER Group SA(a)(e) | | | 2,050 | | | | 72,627 | |
CA Immobilien Anlagen AG | | | 1,868 | | | | 71,189 | |
Deutsche Wohnen SE | | | 3,810 | | | | 203,282 | |
Entra ASA(e) | | | 3,370 | | | | 76,432 | |
Grainger PLC | | | 13,860 | | | | 53,911 | |
Kojamo Oyj | | | 2,070 | | | | 45,944 | |
Kungsleden AB | | | 3,610 | | | | 39,572 | |
LEG Immobilien AG | | | 610 | | | | 94,638 | |
Samhallsbyggnadsbolaget i Norden AB | | | 17,170 | | | | 60,100 | |
Swire Properties Ltd. | | | 16,000 | | | | 46,519 | |
Vonovia SE | | | 1,513 | | | | 110,501 | |
Wharf Real Estate Investment Co., Ltd. | | | 6,000 | | | | 31,183 | |
| | | | | | | | |
| | | | | | | 905,898 | |
| | | | | | | | |
| | | | | | | | |
REAL ESTATE SERVICES–0.0% | | | | | | | | |
Unibail-Rodamco-Westfield | | | 327 | | | | 25,509 | |
| | | | | | | | |
RESIDENTIAL REITS–0.4% | | | | | | | | |
American Homes 4 Rent–Class A | | | 4,013 | | | | 120,390 | |
Bluerock Residential Growth REIT, Inc.(d) | | | 1,800 | | | | 22,806 | |
Camden Property Trust | | | 1,262 | | | | 126,099 | |
Daiwa Securities Living Investments Corp. | | | 45 | | | | 41,775 | |
Essex Property Trust, Inc. | | | 622 | | | | 147,675 | |
Independence Realty Trust, Inc. | | | 7,657 | | | | 102,833 | |
Invitation Homes, Inc. | | | 3,580 | | | | 106,326 | |
Killam Apartment Real Estate Investment Trust | | | 6,151 | | | | 82,680 | |
Minto Apartment Real Estate Investment Trust | | | 2,790 | | | | 44,648 | |
Sun Communities, Inc. | | | 1,108 | | | | 168,361 | |
UDR, Inc. | | | 2,000 | | | | 76,860 | |
| | | | | | | | |
| | | | | | | 1,040,453 | |
| | | | | | | | |
RETAIL REITS–0.4% | | | | | | | | |
AEON REIT Investment Corp. | | | 25 | | | | 32,006 | |
Brixmor Property Group, Inc. | | | 7,564 | | | | 125,184 | |
CapitaLand Integrated Commercial Trust | | | 48,880 | | | | 79,940 | |
Eurocommercial Properties NV(a) | | | 3,100 | | | | 58,021 | |
Kenedix Retail REIT Corp. | | | 8 | | | | 19,522 | |
Kimco Realty Corp. | | | 2,040 | | | | 30,620 | |
Link REIT | | | 12,768 | | | | 115,956 | |
Mercialys SA | | | 3,980 | | | | 34,992 | |
National Retail Properties, Inc. | | | 1,670 | | | | 68,337 | |
NETSTREIT Corp. | | | 1,664 | | | | 32,431 | |
Realty Income Corp. | | | 2,120 | | | | 131,801 | |
Simon Property Group, Inc. | | | 679 | | | | 57,905 | |
SITE Centers Corp. | | | 6,655 | | | | 67,349 | |
Vicinity Centres | | | 75,236 | | | | 93,027 | |
| | | | | | | | |
| | | | | | | 947,091 | |
| | | | | | | | |
SPECIALIZED REITS–0.2% | | | | | | | | |
CubeSmart | | | 3,086 | | | | 103,720 | |
Digital Realty Trust, Inc. | | | 1,690 | | | | 235,772 | |
MGM Growth Properties LLC–Class A | | | 2,660 | | | | 83,258 | |
National Storage Affiliates Trust | | | 3,172 | | | | 114,287 | |
Safestore Holdings PLC | | | 3,520 | | | | 37,622 | |
| | | | | | | | |
| | | | | | | 574,659 | |
| | | | | | | | |
| | | | | | | 10,152,243 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–4.1% | | | | | | | | |
AUTO COMPONENTS–0.4% | | | | | | | | |
Aisin Seiki Co., Ltd. | | | 2,300 | | | | 68,975 | |
Lear Corp. | | | 83 | | | | 13,200 | |
Magna International, Inc.–Class A (Canada) | | | 530 | | | | 37,519 | |
11
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Magna International, Inc.–Class A (United States) | | | 10,592 | | | $ | 749,914 | |
| | | | | | | | |
| | | | | | | 869,608 | |
| | | | | | | | |
AUTOMOBILES–0.1% | | | | | | | | |
Ford Motor Co. | | | 915 | | | | 8,043 | |
General Motors Co. | | | 908 | | | | 37,809 | |
Peugeot SA(a) | | | 758 | | | | 20,759 | |
Tesla, Inc.(a) | | | 81 | | | | 57,159 | |
| | | | | | | | |
| | | | | | | 123,770 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–0.0% | | | | | | | | |
Aristocrat Leisure Ltd. | | | 1,313 | | | | 31,526 | |
Domino’s Pizza, Inc. | | | 20 | | | | 7,669 | |
La Francaise des Jeux SAEM(e) | | | 411 | | | | 18,839 | |
McDonald’s Corp. | | | 32 | | | | 6,867 | |
| | | | | | | | |
| | | | | | | 64,901 | |
| | | | | | | | |
HOUSEHOLD DURABLES–0.0% | | | | | | | | |
Electrolux AB–Class B | | | 1,974 | | | | 45,929 | |
SEB SA | | | 41 | | | | 7,455 | |
Whirlpool Corp. | | | 47 | | | | 8,483 | |
| | | | | | | | |
| | | | | | | 61,867 | |
| | | | | | | | |
INTERNET & DIRECT MARKETING RETAIL–1.2% | | | | | | | | |
Amazon.com, Inc.(a) | | | 836 | | | | 2,722,793 | |
eBay, Inc. | | | 265 | | | | 13,316 | |
HelloFresh SE(a) | | | 394 | | | | 30,477 | |
Zalando SE(a)(e) | | | 562 | | | | 62,512 | |
| | | | | | | | |
| | | | | | | 2,829,098 | |
| | | | | | | | |
MULTILINE RETAIL–0.0% | | | | | | | | |
Dollar General Corp. | | | 83 | | | | 17,455 | |
Next PLC(a) | | | 608 | | | | 58,627 | |
| | | | | | | | |
| | | | | | | 76,082 | |
| | | | | | | | |
SPECIALTY RETAIL–1.6% | | | | | | | | |
AutoZone, Inc.(a) | | | 780 | | | | 924,643 | |
Best Buy Co., Inc. | | | 212 | | | | 21,156 | |
Home Depot, Inc. (The) | | | 6,714 | | | | 1,783,373 | |
Lowe’s Cos., Inc. | | | 22 | | | | 3,531 | |
O’Reilly Automotive, Inc.(a) | | | 160 | | | | 72,411 | |
TJX Cos., Inc. (The) | | | 15,060 | | | | 1,028,447 | |
| | | | | | | | |
| | | | | | | 3,833,561 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–0.8% | | | | | | | | |
Deckers Outdoor Corp.(a) | | | 2,007 | | | | 575,568 | |
LVMH Moet Hennessy Louis Vuitton SE | | | 61 | | | | 38,186 | |
NIKE, Inc.–Class B | | | 9,620 | | | | 1,360,941 | |
Pandora A/S | | | 485 | | | | 54,280 | |
Ralph Lauren Corp. | | | 91 | | | | 9,440 | |
| | | | | | | | |
| | | | | | | 2,038,415 | |
| | | | | | | | |
| | | | | | | 9,897,302 | |
| | | | | | | | |
| | | | | | | | |
FINANCIALS–3.7% | | | | | | | | |
BANKS–1.8% | | | | | | | | |
Bank of America Corp. | | | 49,273 | | | | 1,493,465 | |
BNP Paribas SA(a) | | | 1,470 | | | | 77,605 | |
Citigroup, Inc. | | | 13,272 | | | | 818,351 | |
Fifth Third Bancorp | | | 1,724 | | | | 47,531 | |
JPMorgan Chase & Co. | | | 853 | | | | 108,391 | |
Mebuki Financial Group, Inc. | | | 21,000 | | | | 41,377 | |
PNC Financial Services Group, Inc. (The) | | | 5,690 | | | | 847,810 | |
Signature Bank/New York NY | | | 197 | | | | 26,652 | |
Societe Generale SA(a) | | | 2,160 | | | | 44,903 | |
SVB Financial Group(a) | | | 218 | | | | 84,547 | |
Wells Fargo & Co. | | | 26,949 | | | | 813,321 | |
| | | | | | | | |
| | | | | | | 4,403,953 | |
| | | | | | | | |
CAPITAL MARKETS–1.1% | | | | | | | | |
Ameriprise Financial, Inc. | | | 30 | | | | 5,830 | |
CME Group, Inc.–Class A | | | 3,813 | | | | 694,157 | |
FactSet Research Systems, Inc. | | | 97 | | | | 32,252 | |
Goldman Sachs Group, Inc. (The) | | | 4,870 | | | | 1,284,267 | |
LPL Financial Holdings, Inc. | | | 6,357 | | | | 662,527 | |
Moody’s Corp. | | | 180 | | | | 52,243 | |
Nomura Holdings, Inc. | | | 7,200 | | | | 38,067 | |
S&P Global, Inc. | | | 109 | | | | 35,832 | |
| | | | | | | | |
| | | | | | | 2,805,175 | |
| | | | | | | | |
CONSUMER FINANCE–0.0% | | | | | | | | |
Ally Financial, Inc. | | | 145 | | | | 5,171 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–0.1% | | | | | | | | |
Kinnevik AB–Class B(a) | | | 1,722 | | | | 86,507 | |
M&G PLC | | | 24,177 | | | | 65,258 | |
| | | | | | | | |
| | | | | | | 151,765 | |
| | | | | | | | |
INSURANCE–0.7% | | | | | | | | |
AIA Group Ltd. | | | 400 | | | | 4,875 | |
Athene Holding Ltd.–Class A(a) | | | 581 | | | | 25,064 | |
Aviva PLC | | | 2,165 | | | | 9,630 | |
CNP Assurances(a) | | | 4,892 | | | | 79,481 | |
iA Financial Corp., Inc. | | | 1,539 | | | | 66,715 | |
Manulife Financial Corp. | | | 1,020 | | | | 18,150 | |
MetLife, Inc. | | | 1,474 | | | | 69,204 | |
Progressive Corp. (The) | | | 8,073 | | | | 798,258 | |
Prudential Financial, Inc. | | | 1,079 | | | | 84,238 | |
Reinsurance Group of America, Inc.–Class A | | | 4,131 | | | | 478,783 | |
Sun Life Financial, Inc. | | | 682 | | | | 30,325 | |
| | | | | | | | |
| | | | | | | 1,664,723 | |
| | | | | | | | |
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITS)–0.0% | | | | | | | | |
Annaly Capital Management, Inc. | | | 3,190 | | | | 26,955 | |
| | | | | | | | |
| | | | | | | 9,057,742 | |
| | | | | | | | |
12
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INDUSTRIALS–3.3% | | | | | | | | |
AEROSPACE & DEFENSE–0.5% | | | | | | | | |
L3Harris Technologies, Inc. | | | 4,186 | | | $ | 791,238 | |
Raytheon Technologies Corp. | | | 4,349 | | | | 310,997 | |
| | | | | | | | |
| | | | | | | 1,102,235 | |
| | | | | | | | |
AIR FREIGHT & LOGISTICS–0.0% | | | | | | | | |
Kuehne & Nagel International AG | | | 79 | | | | 17,927 | |
United Parcel Service, Inc.–Class B | | | 475 | | | | 79,990 | |
| | | | | | | | |
| | | | | | | 97,917 | |
| | | | | | | | |
AIRLINES–0.2% | | | | | | | | |
Southwest Airlines Co. | | | 10,795 | | | | 503,155 | |
| | | | | | | | |
BUILDING PRODUCTS–0.1% | | | | | | | | |
Carrier Global Corp. | | | 1,332 | | | | 50,243 | |
Cie de Saint-Gobain(a) | | | 710 | | | | 32,654 | |
Masco Corp. | | | 826 | | | | 45,372 | |
Otis Worldwide Corp. | | | 665 | | | | 44,921 | |
| | | | | | | | |
| | | | | | | 173,190 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–0.0% | | | | | | | | |
Cintas Corp. | | | 13 | | | | 4,595 | |
Copart, Inc.(a) | | | 173 | | | | 22,014 | |
| | | | | | | | |
| | | | | | | 26,609 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–0.3% | | | | | | | | |
ACS Actividades de Construccion y Servicios SA | | | 256 | | | | 8,505 | |
AECOM(a) | | | 14,402 | | | | 716,932 | |
Shimizu Corp. | | | 6,700 | | | | 48,771 | |
| | | | | | | | |
| | | | | | | 774,208 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–0.5% | | | | | | | | |
Acuity Brands, Inc. | | | 667 | | | | 80,767 | |
Eaton Corp. PLC | | | 7,559 | | | | 908,138 | |
Legrand SA | | | 339 | | | | 30,326 | |
Prysmian SpA | | | 1,379 | | | | 49,082 | |
Rockwell Automation, Inc. | | | 133 | | | | 33,358 | |
Vestas Wind Systems A/S | | | 292 | | | | 68,979 | |
| | | | | | | | |
| | | | | | | 1,170,650 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–0.4% | | | | | | | | |
Honeywell International, Inc. | | | 4,962 | | | | 1,055,417 | |
| | | | | | | | |
MACHINERY–0.1% | | | | | | | | |
Deere & Co. | | | 203 | | | | 54,617 | |
Mitsubishi Heavy Industries Ltd. | | | 200 | | | | 6,125 | |
Snap-on, Inc. | | | 466 | | | | 79,751 | |
Techtronic Industries Co., Ltd. | | | 5,500 | | | | 78,614 | |
Volvo AB–Class B(a) | | | 3,775 | | | | 89,366 | |
| | | | | | | | |
| | | | | | | 308,473 | |
| | | | | | | | |
| | | | | | | | |
MARINE–0.0% | | | | | | | | |
Nippon Yusen KK | | | 2,500 | | | | 58,327 | |
| | | | | | | | |
PROFESSIONAL SERVICES–0.0% | | | | | | | | |
Randstad NV(a) | | | 363 | | | | 23,498 | |
Robert Half International, Inc. | | | 1,264 | | | | 78,975 | |
| | | | | | | | |
| | | | | | | 102,473 | |
| | | | | | | | |
ROAD & RAIL–0.9% | | | | | | | | |
CSX Corp. | | | 10,199 | | | | 925,559 | |
Knight-Swift Transportation Holdings, Inc. | | | 12,504 | | | | 522,918 | |
Norfolk Southern Corp. | | | 2,551 | | | | 606,143 | |
| | | | | | | | |
| | | | | | | 2,054,620 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–0.3% | | | | | | | | |
United Rentals, Inc.(a) | | | 3,017 | | | | 699,672 | |
WW Grainger, Inc. | | | 6 | | | | 2,450 | |
| | | | | | | | |
| | | | | | | 702,122 | |
| | | | | | | | |
| | | | | | | 8,129,396 | |
| | | | | | | | |
MATERIALS–1.8% | | | | | | | | |
CHEMICALS–0.7% | | | | | | | | |
Clariant AG | | | 579 | | | | 12,284 | |
Covestro AG(e) | | | 1,080 | | | | 66,543 | |
Daicel Corp. | | | 2,600 | | | | 19,004 | |
Evonik Industries AG | | | 2,148 | | | | 70,206 | |
FMC Corp. | | | 37 | | | | 4,252 | |
Kuraray Co., Ltd. | | | 1,700 | | | | 18,100 | |
LANXESS AG | | | 507 | | | | 38,558 | |
LyondellBasell Industries NV–Class A | | | 6,134 | | | | 562,242 | |
Mitsubishi Chemical Holdings Corp. | | | 3,600 | | | | 21,810 | |
Mitsui Chemicals, Inc. | | | 1,300 | | | | 38,188 | |
Orbia Advance Corp. SAB de CV | | | 30,101 | | | | 70,777 | |
PPG Industries, Inc. | | | 82 | | | | 11,826 | |
RPM International, Inc. | | | 874 | | | | 79,342 | |
Sika AG | | | 156 | | | | 42,525 | |
Umicore SA | | | 725 | | | | 34,847 | |
Westlake Chemical Corp. | | | 6,333 | | | | 516,773 | |
Yara International ASA | | | 1,390 | | | | 57,665 | |
| | | | | | | | |
| | | | | | | 1,664,942 | |
| | | | | | | | |
CONSTRUCTION MATERIALS–0.0% | | | | | | | | |
Fletcher Building Ltd.(a) | | | 10,890 | | | | 46,330 | |
Grupo Cementos de Chihuahua SAB de CV | | | 3,320 | | | | 20,107 | |
| | | | | | | | |
| | | | | | | 66,437 | |
| | | | | | | | |
CONTAINERS & PACKAGING–0.0% | | | | | | | | |
Sealed Air Corp. | | | 1,017 | | | | 46,568 | |
Smurfit Kappa Group PLC | | | 602 | | | | 27,976 | |
| | | | | | | | |
| | | | | | | 74,544 | |
| | | | | | | | |
13
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
METALS & MINING–1.0% | | | | | | | | |
Agnico Eagle Mines Ltd. | | | 3,779 | | | $ | 265,976 | |
Alcoa Corp.(a) | | | 3,460 | | | | 79,753 | |
Anglo American PLC | | | 4,080 | | | | 134,731 | |
AngloGold Ashanti Ltd. | | | 5,909 | | | | 136,193 | |
APERAM SA | | | 2,580 | | | | 107,368 | |
ArcelorMittal SA(a) | | | 7,087 | | | | 162,079 | |
BHP Group Ltd. | | | 243 | | | | 7,940 | |
Boliden AB | | | 2,635 | | | | 93,483 | |
First Quantum Minerals Ltd. | | | 6,573 | | | | 117,993 | |
Fortescue Metals Group Ltd. | | | 429 | | | | 7,749 | |
Glencore PLC(a) | | | 91,129 | | | | 289,407 | |
Industrias Penoles SAB de CV | | | 2,589 | | | | 44,014 | |
Lundin Mining Corp. | | | 6,445 | | | | 57,215 | |
MMC Norilsk Nickel PJSC (ADR) | | | 2,130 | | | | 67,052 | |
Northern Star Resources Ltd. | | | 5,420 | | | | 52,975 | |
Orocobre Ltd.(a) | | | 5,420 | | | | 18,702 | |
OZ Minerals Ltd. | | | 2,685 | | | | 39,224 | |
Polyus PJSC (GDR)(e) | | | 730 | | | | 75,151 | |
Regis Resources Ltd. | | | 13,940 | | | | 40,227 | |
Rio Tinto PLC | | | 4,641 | | | | 349,342 | |
St. Barbara Ltd. | | | 23,750 | | | | 43,202 | |
Steel Dynamics, Inc. | | | 125 | | | | 4,609 | |
Sumitomo Metal Mining Co., Ltd. | | | 1,400 | | | | 62,273 | |
Vale SA (Sponsored ADR)–Class B | | | 13,836 | | | | 231,891 | |
Yamana Gold, Inc. | | | 4,751 | | | | 27,135 | |
| | | | | | | | |
| | | | | | | 2,515,684 | |
| | | | | | | | |
PAPER & FOREST PRODUCTS–0.1% | | | | | | | | |
Suzano SA(a) | | | 9,200 | | | | 103,317 | |
| | | | | | | | |
| | | | | | | 4,424,924 | |
| | | | | | | | |
CONSUMER STAPLES–1.8% | | | | | | | | |
BEVERAGES–0.0% | | | | | | | | |
Coca-Cola Amatil Ltd. | | | 2,823 | | | | 28,128 | |
Kirin Holdings Co., Ltd. | | | 3,600 | | | | 85,007 | |
| | | | | | | | |
| | | | | | | 113,135 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–0.8% | | | | | | | | |
Coles Group Ltd. | | | 2,043 | | | | 28,544 | |
Costco Wholesale Corp. | | | 1,143 | | | | 430,660 | |
Kroger Co. (The) | | | 149 | | | | 4,732 | |
Walmart, Inc. | | | 10,007 | | | | 1,442,509 | |
| | | | | | | | |
| | | | | | | 1,906,445 | |
| | | | | | | | |
FOOD PRODUCTS–0.2% | | | | | | | | |
Bunge Ltd. | | | 126 | | | | 8,263 | |
Kellogg Co. | | | 659 | | | | 41,010 | |
Mowi ASA | | | 7,060 | | | | 157,268 | |
Nestle SA | | | 543 | | | | 64,189 | |
Tyson Foods, Inc.–Class A | | | 1,760 | | | | 113,414 | |
| | | | | | | | |
| | | | | | | 384,144 | |
| | | | | | | | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–0.8% | | | | | | | | |
Kimberly-Clark Corp. | | | 121 | | | | 16,315 | |
Procter & Gamble Co. (The) | | | 12,980 | | | | 1,806,037 | |
| | | | | | | | |
| | | | | | | 1,822,352 | |
| | | | | | | | |
PERSONAL PRODUCTS–0.0% | | | | | | | | |
Pola Orbis Holdings, Inc. | | | 600 | | | | 12,184 | |
Unilever PLC | | | 1,465 | | | | 87,861 | |
| | | | | | | | |
| | | | | | | 100,045 | |
| | | | | | | | |
TOBACCO–0.0% | | | | | | | | |
Philip Morris International, Inc. | | | 1,035 | | | | 85,688 | |
| | | | | | | | |
| | | | | | | 4,411,809 | |
| | | | | | | | |
ENERGY–1.8% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.0% | | | | | | | | |
Baker Hughes Co.–Class A | | | 533 | | | | 11,113 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–1.8% | | | | | | | | |
Aker BP ASA | | | 5,338 | | | | 134,699 | |
BP PLC | | | 90,841 | | | | 313,469 | |
Canadian Natural Resources Ltd. | | | 671 | | | | 16,125 | |
Cheniere Energy, Inc.(a) | | | 558 | | | | 33,497 | |
Chevron Corp. | | | 12,161 | | | | 1,026,996 | |
ENEOS Holdings, Inc. | | | 15,200 | | | | 54,593 | |
EOG Resources, Inc. | | | 12,568 | | | | 626,766 | |
Exxon Mobil Corp. | | | 4,501 | | | | 185,531 | |
Galp Energia SGPS SA | | | 2,905 | | | | 30,783 | |
LUKOIL PJSC (Sponsored ADR) | | | 850 | | | | 58,106 | |
Motor Oil Hellas Corinth Refineries SA | | | 3,430 | | | | 49,315 | |
Neste Oyj | | | 78 | | | | 5,663 | |
Parkland Corp./Canada | | | 484 | | | | 15,358 | |
PetroChina Co., Ltd.–Class H | | | 422,000 | | | | 130,670 | |
Petroleo Brasileiro SA (Preference Shares) | | | 36,300 | | | | 197,068 | |
Repsol SA | | | 21,435 | | | | 215,939 | |
Royal Dutch Shell PLC–Class A | | | 1,579 | | �� | | 27,690 | |
Royal Dutch Shell PLC–Class B | | | 47,949 | | | | 812,674 | |
TOTAL SE | | | 9,279 | | | | 400,502 | |
Woodside Petroleum Ltd. | | | 314 | | | | 5,509 | |
| | | | | | | | |
| | | | | | | 4,340,953 | |
| | | | | | | | |
| | | | | | | 4,352,066 | |
| | | | | | | | |
UTILITIES–1.0% | | | | | | | | |
ELECTRIC UTILITIES–1.0% | | | | | | | | |
American Electric Power Co., Inc. | | | 10,917 | | | | 909,059 | |
Endesa SA | | | 336 | | | | 9,216 | |
Enel SpA | | | 20,742 | | | | 211,044 | |
NextEra Energy, Inc. | | | 13,823 | | | | 1,066,444 | |
Red Electrica Corp. SA | | | 1,728 | | | | 35,478 | |
14
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Terna Rete Elettrica Nazionale SpA | | | 5,154 | | | $ | 39,604 | |
| | | | | | | | |
| | | | | | | 2,270,845 | |
| | | | | | | | |
GAS UTILITIES–0.0% | | | | | | | | |
UGI Corp. | | | 2,190 | | | | 76,563 | |
| | | | | | | | |
MULTI-UTILITIES–0.0% | | | | | | | | |
Sempra Energy | | | 141 | | | | 17,965 | |
| | | | | | | | |
| | | | | | | 2,365,373 | |
| | | | | | | | |
CONSUMER SERVICES–0.0% | | | | | | | | |
HOTELS, RESORTS & CRUISE LINES–0.0% | | | | | | | | |
Hilton Grand Vacations, Inc.(a) | | | 1,690 | | | | 52,981 | |
| | | | | | | | |
LEISURE FACILITIES–0.0% | | | | | | | | |
Planet Fitness, Inc.(a) | | | 285 | | | | 22,125 | |
| | | | | | | | |
| | | | | | | 75,106 | |
| | | | | | | | |
TRANSPORTATION–0.0% | | | | | | | | |
HIGHWAYS & RAILTRACKS–0.0% | | | | | | | | |
Transurban Group | | | 6,998 | | | | 73,744 | |
| | | | | | | | |
CONSUMER DURABLES & APPAREL–0.0% | | | | | | | | |
HOMEBUILDING–0.0% | | | | | | | | |
Persimmon PLC | | | 950 | | | | 35,856 | |
PulteGroup, Inc. | | | 830 | | | | 35,789 | |
| | | | | | | | |
| | | | | | | 71,645 | |
| | | | | | | | |
SOFTWARE & SERVICES–0.0% | | | | | | | | |
INTERNET SERVICES & INFRASTRUCTURE–0.0% | | | | | | | | |
GDS Holdings Ltd. (ADR)(a) | | | 350 | | | | 32,774 | |
| | | | | | | | |
Total Common Stocks
(cost $67,527,919) | | | | | | | 98,736,230 | |
| | | | | | | | |
INVESTMENT COMPANIES–26.5% | | | | | | | | |
FUNDS AND INVESTMENT TRUSTS–26.5%(f)(g) | | | | | | | | |
AB Discovery Growth Fund, Inc.–Class Z | | | 200,740 | | | | 3,073,324 | |
AB Trust–AB Discovery Value Fund–Class Z | | | 156,078 | | | | 3,151,209 | |
Bernstein Fund, Inc.–International Small Cap Portfolio–Class Z | | | 701,404 | | | | 8,409,829 | |
Bernstein Fund, Inc.–International Strategic Equities Portfolio–Class Z | | | 3,363,423 | | | | 42,917,274 | |
Bernstein Fund, Inc.–Small Cap Core Portfolio–Class Z | | | 236,284 | | | | 3,104,771 | |
Sanford C. Bernstein Fund, Inc.–Emerging Markets Portfolio–Class Z | | | 121,799 | | | | 3,964,568 | |
| | | | | | | | |
Total Investment Companies
(cost $63,115,115) | | | | | | | 64,620,975 | |
| | | | | | | | |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
GOVERNMENTS–TREASURIES–11.9% | | | | | | | | | |
AUSTRALIA–1.7% | | | | | | | | | | | | |
Australia Government Bond
Series 144
3.75%, 04/21/2037(e) | | | AUD | | | | 620 | | | $ | 636,882 | |
Series 145
2.75%, 06/21/2035(e) | | | | | | | 802 | | | | 733,967 | |
Series 150
3.00%, 03/21/2047(e) | | | | | | | 1,430 | | | | 1,356,399 | |
Series 161
0.25%, 11/21/2025(e) | | | | | | | 1,770 | | | | 1,359,437 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,086,685 | |
| | | | | | | | | | | | |
AUSTRIA–0.3% | | | | | | | | | | | | |
Republic of Austria Government Bond
0.75%, 02/20/2028(e) | | | EUR | | | | 510 | | | | 683,059 | |
| | | | | | | | | | | | |
BELGIUM–0.1% | | | | | | | | | | | | |
Kingdom of Belgium Government Bond
Series 76
1.90%, 06/22/2038(e) | | | | | | | 180 | | | | 292,300 | |
| | | | | | | | | | | | |
CANADA–1.1% | | | | | | | | | | | | |
Canadian Government Bond
1.25%, 03/01/2025–
06/01/2030 | | | CAD | | | | 2,860 | | | | 2,356,312 | |
2.00%, 12/01/2051 | | | | | | | 359 | | | | 339,215 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,695,527 | |
| | | | | | | | | | | | |
CHINA–0.8% | | | | | | | | | | | | |
China Government Bond
Series INBK
3.27%, 11/19/2030 | | | CNY | | | | 5,690 | | | | 880,899 | |
3.39%, 03/16/2050 | | | | | | | 7,870 | | | | 1,118,217 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,999,116 | |
| | | | | | | | | | | | |
COLOMBIA–0.4% | | | | | | | | | | | | |
Colombian TES
Series B
5.75%, 11/03/2027 | | | COP | | | | 2,916,500 | | | | 902,155 | |
| | | | | | | | | | | | |
FINLAND–0.1% | | | | | | | | | | | | |
Finland Government Bond
0.50%, 09/15/2028(e) | | | EUR | | | | 115 | | | | 152,194 | |
| | | | | | | | | | | | |
FRANCE–0.1% | | | | | | | | | | | | |
French Republic Government Bond OAT
1.50%, 05/25/2050(e) | | | | | | | 110 | | | | 179,152 | |
| | | | | | | | | | | | |
GERMANY–0.4% | | | | | | | | | | | | |
Bundesrepublik Deutschland Bundesanleihe
Zero Coupon, 08/15/2050(e) | | | | | | | 275 | | | | 352,933 | |
Series 3
4.75%, 07/04/2034(e) | | | | | | | 250 | | | | 530,083 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 883,016 | |
| | | | | | | | | | | | |
15
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
ITALY–0.7% | | | | | | | | | | | | |
Italy Buoni Poliennali Del Tesoro 1.80%, 03/01/2041(e) | | | EUR | | | | 1,235 | | | $ | 1,668,921 | |
| | | | | | | | | | | | |
JAPAN–3.5% | | | | | | | | | | | | |
Japan Government Ten Year Bond
Series 358
0.10%, 03/20/2030 | | | JPY | | | | 205,850 | | | | 2,013,006 | |
Series 359
0.10%, 06/20/2030 | | | | | | | 277,550 | | | | 2,711,042 | |
Japan Government Thirty Year Bond
Series 62
0.50%, 03/20/2049 | | | | | | | 63,600 | | | | 598,131 | |
Series 65
0.40%, 12/20/2049 | | | | | | | 62,950 | | | | 572,674 | |
Series 68
0.60%, 09/20/2050 | | | | | | | 69,900 | | | | 669,464 | |
Japan Government Twenty Year Bond
Series 169
0.30%, 06/20/2039 | | | | | | | 31,650 | | | | 302,550 | |
Series 171
0.30%, 12/20/2039 | | | | | | | 44,850 | | | | 427,425 | |
Japan Government Two Year Bond
Series 419
0.10%, 12/01/2022 | | | | | | | 126,950 | | | | 1,234,792 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 8,529,084 | |
| | | | | | | | | | | | |
MALAYSIA–0.1% | | | | | | | | | | | | |
Malaysia Government Bond Series 0310
4.498%, 04/15/2030 | | | MYR | | | | 1,088 | | | | 309,646 | |
| | | | | | | | | | | | |
MEXICO–0.0% | | | | | | | | | | | | |
Mexican Bonos
Series M
8.00%, 11/07/2047 | | | MXN | | | | 1,125 | | | | 66,394 | |
| | | | | | | | | | | | |
SPAIN–0.3% | | | | | | | | | | | | |
Spain Government Bond
1.20%, 10/31/2040(e) | | | EUR | | | | 455 | | | | 616,038 | |
4.20%, 01/31/2037(e) | | | | | | | 114 | | | | 221,807 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 837,845 | |
| | | | | | | | | | | | |
UNITED KINGDOM–0.9% | | | | | | | | | | | | |
United Kingdom Gilt
0.625%, 10/22/2050(e) | | | GBP | | | | 735 | | | | 973,915 | |
1.75%, 09/07/2037(e) | | | | | | | 821 | | | | 1,332,655 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,306,570 | |
| | | | | | | | | | | | |
UNITED STATES–1.4% | | | | | | | | | | | | |
U.S. Treasury Bonds
1.125%, 05/15/2040–08/15/2040 | | | U.S.$ | | | | 2,780 | | | | 2,633,725 | |
4.50%, 08/15/2039 | | | | | | | 455 | | | | 695,795 | |
| | | | | | | | | | | | |
4.625%, 02/15/2040 | | | U.S.$ | | | | 100 | | | | 155,781 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,485,301 | |
| | | | | | | | | | | | |
Total Governments–Treasuries
(cost $27,659,743) | | | | | | | | | | | 29,076,965 | |
| | | | | | | | | | | | |
CORPORATES–INVESTMENT GRADE–9.4% | | | | | | | | | | | | |
INDUSTRIAL–5.0% | | | | | | | | | | | | |
BASIC–0.6% | | | | | | | | | | | | |
AngloGold Ashanti Holdings PLC
3.75%, 10/01/2030 | | | | | | | 201 | | | | 215,070 | |
Glencore Finance Europe Ltd.
1.875%, 09/13/2023(e) | | | EUR | | | | 125 | | | | 159,480 | |
3.125%, 03/26/2026(e) | | | GBP | | | | 110 | | | | 162,531 | |
Inversiones CMPC SA
3.85%, 01/13/2030(e) | | | U.S.$ | | | | 200 | | | | 223,938 | |
SABIC Capital II BV
4.00%, 10/10/2023(e) | | | | | | | 335 | | | | 360,544 | |
SIG Combibloc PurchaseCo Sarl
1.875%, 06/18/2023(e) | | | EUR | | | | 140 | | | | 176,670 | |
Smurfit Kappa Acquisitions ULC
2.875%, 01/15/2026(e) | | | | | | | 150 | | | | 202,521 | |
Suzano Austria GmbH
3.75%, 01/15/2031 | | | U.S.$ | | | | 32 | | | | 33,920 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,534,674 | |
| | | | | | | | | | | | |
CAPITAL GOODS–0.1% | | | | | | | | | | | | |
CNH Industrial Finance Europe SA
1.75%, 09/12/2025(e) | | | EUR | | | | 190 | | | | 247,280 | |
Westinghouse Air Brake Technologies Corp.
3.20%, 06/15/2025 | | | U.S.$ | | | | 10 | | | | 10,780 | |
4.40%, 03/15/2024 | | | | | | | 67 | | | | 73,334 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 331,394 | |
| | | | | | | | | | | | |
COMMUNICATIONS–MEDIA–0.5% | | | | | | | | | | | | |
Charter Communications Operating LLC/Charter Communications Operating Capital
4.80%, 03/01/2050 | | | | | | | 17 | | | | 20,191 | |
5.125%, 07/01/2049 | | | | | | | 84 | | | | 102,281 | |
5.375%, 05/01/2047 | | | | | | | 35 | | | | 43,797 | |
Comcast Corp.
0.75%, 02/20/2032 | | | EUR | | | | 155 | | | | 196,941 | |
Fox Corp.
4.709%, 01/25/2029 | | | U.S.$ | | | | 215 | | | | 261,051 | |
Prosus NV
3.68%, 01/21/2030(e) | | | | | | | 220 | | | | 238,837 | |
ViacomCBS, Inc.
3.70%, 06/01/2028 | | | | | | | 23 | | | | 26,266 | |
16
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
4.20%, 05/19/2032 | | | U.S.$ | | | | 56 | | | $ | 67,315 | |
4.95%, 01/15/2031 | | | | | | | 114 | | | | 143,043 | |
Walt Disney Co. (The)
3.60%, 01/13/2051 | | | | | | | 35 | | | | 42,425 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,142,147 | |
| | | | | | | | | | | | |
COMMUNICATIONS–
TELECOMMUNICATIONS–0.3% | |
AT&T, Inc.
3.50%, 09/15/2053(e) | | | | | | | 200 | | | | 201,110 | |
Series B
2.875%, 03/02/2025(h) | | | EUR | | | | 100 | | | | 123,123 | |
British Telecommunications PLC
9.625%, 12/15/2030 | | | U.S.$ | | | | 145 | | | | 240,276 | |
Sprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC/Sprint Spectrum Co. III LLC
4.738%, 03/20/2025(e) | | | | | | | 200 | | | | 217,122 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 781,631 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–AUTOMOTIVE–0.4% | | | | | | | | | | | | |
Harley-Davidson Financial Services, Inc.
0.90%, 11/19/2024(e) | | | EUR | | | | 200 | | | | 247,941 | |
3.35%, 06/08/2025(e) | | | U.S.$ | | | | 30 | | | | 32,471 | |
Lear Corp.
3.50%, 05/30/2030 | | | | | | | 25 | | | | 27,316 | |
3.80%, 09/15/2027 | | | | | | | 127 | | | | 142,203 | |
4.25%, 05/15/2029 | | | | | | | 33 | | | | 37,633 | |
Nissan Motor Co., Ltd.
4.345%, 09/17/2027(e) | | | | | | | 200 | | | | 219,908 | |
Volkswagen Bank GmbH
1.25%, 06/10/2024(e) | | | EUR | | | | 100 | | | | 126,496 | |
Volkswagen Leasing GmbH
2.625%, 01/15/2024(e) | | | | | | | 73 | | | | 95,939 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 929,907 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–OTHER–0.1% | | | | | | | | | |
Las Vegas Sands Corp.
3.50%, 08/18/2026 | | | U.S.$ | | | | 89 | | | | 95,419 | |
Marriott International, Inc./MD
Series EE
5.75%, 05/01/2025 | | | | | | | 109 | | | | 127,530 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 222,949 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–RETAILERS–0.1% | | | | | | | | | | | | |
AutoNation, Inc.
4.75%, 06/01/2030 | | | | | | | 12 | | | | 14,456 | |
Ralph Lauren Corp.
2.95%, 06/15/2030 | | | | | | | 162 | | | | 175,387 | |
Ross Stores, Inc.
4.70%, 04/15/2027 | | | | | | | 24 | | | | 28,374 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 218,217 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.9% | | | | | | | | | |
Altria Group, Inc.
3.125%, 06/15/2031 | | | EUR | | | | 270 | | | | 393,298 | |
Amgen, Inc.
4.663%, 06/15/2051 | | | U.S.$ | | | | 150 | | | | 203,659 | |
Anheuser-Busch InBev Worldwide, Inc.
5.55%, 01/23/2049 | | | | | | | 145 | | | | 205,655 | |
BAT Capital Corp.
4.906%, 04/02/2030 | | | | | | | 55 | | | | 66,421 | |
BAT Netherlands Finance BV
3.125%, 04/07/2028(e) | | | EUR | | | | 200 | | | | 284,984 | |
Biogen, Inc.
3.15%, 05/01/2050 | | | U.S.$ | | | | 202 | | | | 208,630 | |
CommonSpirit Health
3.91%, 10/01/2050 | | | | | | | 120 | | | | 133,812 | |
CVS Health Corp.
5.05%, 03/25/2048 | | | | | | | 125 | | | | 169,003 | |
DH Europe Finance II SARL
0.45%, 03/18/2028 | | | EUR | | | | 143 | | | | 177,978 | |
Gilead Sciences, Inc.
2.80%, 10/01/2050 | | | U.S.$ | | | | 200 | | | | 199,704 | |
Takeda Pharmaceutical Co., Ltd.
0.75%, 07/09/2027 | | | EUR | | | | 131 | | | | 166,230 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,209,374 | |
| | | | | | | | | | | | |
ENERGY–0.9% | | | | | | | | | | | | |
Boardwalk Pipelines LP
4.80%, 05/03/2029 | | | U.S.$ | | | | 125 | | | | 143,124 | |
BP Capital Markets PLC
1.573%, 02/16/2027(e) | | | EUR | | | | 175 | | | | 232,358 | |
3.25%, 03/22/2026(e)(h) | | | | | | | 135 | | | | 175,854 | |
Energy Transfer Operating LP
3.75%, 05/15/2030 | | | U.S.$ | | | | 101 | | | | 108,847 | |
5.50%, 06/01/2027 | | | | | | | 190 | | | | 222,648 | |
Eni SpA
4.25%, 05/09/2029(e) | | | | | | | 270 | | | | 319,232 | |
Husky Energy, Inc.
4.40%, 04/15/2029 | | | | | | | 220 | | | | 244,928 | |
ONEOK, Inc.
4.55%, 07/15/2028 | | | | | | | 104 | | | | 118,940 | |
6.35%, 01/15/2031 | | | | | | | 130 | | | | 166,907 | |
Plains All American Pipeline LP/PAA Finance Corp.
3.80%, 09/15/2030 | | | | | | | 42 | | | | 44,998 | |
Plains All American Pipeline LP/PAA Finance Corp.
3.55%, 12/15/2029 | | | | | | | 16 | | | | 16,752 | |
4.50%, 12/15/2026 | | | | | | | 29 | | | | 32,504 | |
Saudi Arabian Oil Co.
2.25%, 11/24/2030(e) | | | | | | | 200 | | | | 202,750 | |
2.875%, 04/16/2024(e) | | | | | | | 200 | | | | 212,500 | |
17
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Valero Energy Corp.
6.625%, 06/15/2037 | | | U.S.$ | | | | 32 | | | $ | 42,437 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,284,779 | |
| | | | | | | | | | | | |
OTHER INDUSTRIAL–0.1% | | | | | |
Alfa SAB de CV
5.25%, 03/25/2024(e) | | | | | | | 200 | | | | 220,375 | |
| | | | | | | | | | | | |
SERVICES–0.0% | | | | | | | | | | | | |
Expedia Group, Inc.
6.25%, 05/01/2025(e) | | | | | | | 6 | | | | 6,959 | |
Global Payments, Inc.
4.45%, 06/01/2028 | | | | | | | 70 | | | | 82,913 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 89,872 | |
| | | | | | | | | | | | |
TECHNOLOGY–0.5% | | | | | |
Baidu, Inc.
3.075%, 04/07/2025 | | | | | | | 205 | | | | 218,291 | |
Broadcom Corp./Broadcom Cayman Finance Ltd.
3.50%, 01/15/2028 | | | | | | | 19 | | | | 20,913 | |
Broadcom, Inc.
4.11%, 09/15/2028 | | | | | | | 156 | | | | 178,427 | |
Fidelity National Information Services, Inc.
1.00%, 12/03/2028 | | | EUR | | | | 165 | | | | 211,498 | |
Fiserv, Inc.
1.125%, 07/01/2027 | | | | | | | 200 | | | | 258,721 | |
Leidos, Inc.
4.375%, 05/15/2030(e) | | | U.S.$ | | | | 109 | | | | 130,659 | |
Oracle Corp.
3.60%, 04/01/2050 | | | | | | | 185 | | | | 215,962 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,234,471 | |
| | | | | | | | | | | | |
TRANSPORTATION–AIRLINES–0.2% | | | | | | | | | | | | |
Delta Air Lines, Inc.
7.00%, 05/01/2025(e) | | | | | | | 99 | | | | 114,664 | |
Southwest Airlines Co.
5.25%, 05/04/2025 | | | | | | | 199 | | | | 230,694 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 345,358 | |
| | | | | | | | | | | | |
TRANSPORTATION–SERVICES–0.3% | | | | | | | | | | | | |
Adani Ports & Special Economic Zone Ltd.
3.95%, 01/19/2022(e) | | | | | | | 200 | | | | 204,500 | |
ENA Master Trust
4.00%, 05/19/2048(e) | | | | | | | 200 | | | | 215,187 | |
Heathrow Funding Ltd.
6.75%, 12/03/2026(e) | | | GBP | | | | 135 | | | | 237,715 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 657,402 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 12,202,550 | |
| | | | | | | | | | | | |
FINANCIAL INSTITUTIONS–4.0% | | | | | |
BANKING–2.7% | | | | | | | | | | | | |
ABN AMRO Bank NV
4.75%, 07/28/2025(e) | | | U.S.$ | | | | 225 | | | | 259,693 | |
Australia & New Zealand Banking Group Ltd.
4.40%, 05/19/2026(e) | | | | | | | 215 | | | | 247,448 | |
| | | | | | | | | | | | |
Bankia SA
1.125%, 11/12/2026(e) | | | EUR | | | | 100 | | | | 127,278 | |
BNP Paribas SA
2.219%, 06/09/2026(e) | | | U.S.$ | | | | 200 | | | | 209,288 | |
BPCE SA
4.625%, 07/11/2024(e) | | | | | | | 200 | | | | 223,686 | |
Capital One Financial Corp.
1.65%, 06/12/2029 | | | EUR | | | | 270 | | | | 353,644 | |
Citigroup, Inc.
1.50%, 07/24/2026(e) | | | | | | | 155 | | | | 201,145 | |
5.95%, 01/30/2023(h) | | | U.S.$ | | | | 90 | | | | 94,611 | |
Commonwealth Bank of Australia
4.50%, 12/09/2025(e) | | | | | | | 205 | | | | 236,183 | |
Cooperatieve Rabobank UA 3.25%, 12/29/2026(e)(h) | | | EUR | | | | 200 | | | | 246,773 | |
Credit Suisse Group AG
4.194%, 04/01/2031(e) | | | U.S.$ | | | | 250 | | | | 294,142 | |
Danske Bank A/S
3.244%, 12/20/2025(e) | | | | | | | 350 | | | | 374,885 | |
5.375%, 01/12/2024(e) | | | | | | | 200 | | | | 225,744 | |
Deutsche Bank AG/New York NY
3.961%, 11/26/2025 | | | | | | | 225 | | | | 246,037 | |
DNB Bank ASA
6.50%, 03/26/2022(e)(h) | | | | | | | 210 | | | | 219,878 | |
Fifth Third Bancorp
Series L
4.50%, 09/30/2025(h) | | | | | | | 41 | | | | 43,759 | |
Goldman Sachs Group, Inc. (The)
1.25%, 05/01/2025(e) | | | EUR | | | | 190 | | | | 241,215 | |
Series O
5.30%, 11/10/2026(h) | | | U.S.$ | | | | 10 | | | | 10,999 | |
HSBC Holdings PLC
6.375%, 03/30/2025(h) | | | | | | | 200 | | | | 218,768 | |
ING Groep NV
3.00%, 02/18/2026(e) | | | GBP | | | | 200 | | | | 303,872 | |
6.50%, 04/16/2025(h) | | | U.S.$ | | | | 232 | | | | 255,293 | |
JPMorgan Chase & Co.
1.09%, 03/11/2027(e) | | | EUR | | | | 170 | | | | 218,281 | |
Morgan Stanley
Series G
1.375%, 10/27/2026 | | | | | | | 100 | | | | 131,230 | |
Series J
4.047% (LIBOR 3 Month + 3.81%), 04/15/2021(h)(i) | | | U.S.$ | | | | 55 | | | | 54,876 | |
Natwest Group PLC
Series U
2.574% (LIBOR 3 Month + 2.32%), 09/30/2027(h)(i) | | | | | | | 200 | | | | 193,216 | |
Societe Generale SA
4.25%, 04/14/2025(e) | | | | | | | 205 | | | | 226,095 | |
18
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Standard Chartered PLC
1.724% (LIBOR 3 Month + 1.51%), 01/30/2027(e)(h)(i) | | | U.S.$ | | | | 200 | | | $ | 185,154 | |
Truist Financial Corp.
Series Q
5.10%, 03/01/2030(h) | | | | | | | 75 | | | | 85,661 | |
UBS Group AG
7.125%, 08/10/2021(e)(h) | | | | | | | 230 | | | | 236,242 | |
UniCredit SpA
2.569%, 09/22/2026(e) | | | | | | | 350 | | | | 357,003 | |
Wells Fargo & Co.
0.625%, 08/14/2030(e) | | | EUR | | | | 245 | | | | 304,461 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 6,626,560 | |
| | | | | | | | | | | | |
FINANCE–0.5% | | | | | | | | | | | | |
AerCap Ireland Capital DAC/AerCap Global Aviation Trust
6.50%, 07/15/2025 | | | U.S.$ | | | | 150 | | | | 179,319 | |
Air Lease Corp.
2.875%, 01/15/2026 | | | | | | | 67 | | | | 70,887 | |
3.625%, 04/01/2027 | | | | | | | 14 | | | | 15,086 | |
3.875%, 07/03/2023 | | | | | | | 6 | | | | 6,393 | |
4.25%, 02/01/2024 | | | | | | | 21 | | | | 22,785 | |
Aircastle Ltd.
4.40%, 09/25/2023 | | | | | | | 67 | | | | 71,496 | |
5.25%, 08/11/2025(e) | | | | | | | 69 | | | | 75,921 | |
Aviation Capital Group LLC
2.875%, 01/20/2022(e) | | | | | | | 11 | | | | 11,159 | |
3.50%, 11/01/2027(e) | | | | | | | 18 | | | | 18,025 | |
3.875%, 05/01/2023(e) | | | | | | | 44 | | | | 45,878 | |
4.125%, 08/01/2025(e) | | | | | | | 2 | | | | 2,089 | |
4.375%, 01/30/2024(e) | | | | | | | 13 | | | | 13,717 | |
4.875%, 10/01/2025(e) | | | | | | | 23 | | | | 24,631 | |
5.50%, 12/15/2024(e) | | | | | | | 47 | | | | 51,904 | |
GE Capital European Funding Unlimited Co.
4.625%, 02/22/2027 | | | EUR | | | | 100 | | | | 152,693 | |
GE Capital Funding LLC
4.40%, 05/15/2030(e) | | | U.S.$ | | | | 200 | | | | 235,622 | |
Synchrony Financial
3.95%, 12/01/2027 | | | | | | | 25 | | | | 28,092 | |
4.50%, 07/23/2025 | | | | | | | 51 | | | | 57,398 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,083,095 | |
| | | | | | | | | | | | |
INSURANCE–0.5% | | | | | | | | | | | | |
Alleghany Corp.
3.625%, 05/15/2030 | | | | | | | 172 | | | | 194,669 | |
ASR Nederland NV
3.375%, 05/02/2049(e) | | | EUR | | | | 100 | | | | 136,519 | |
Centene Corp.
4.25%, 12/15/2027 | | | U.S.$ | | | | 28 | | | | 29,802 | |
4.625%, 12/15/2029 | | | | | | | 37 | | | | 41,031 | |
CNP Assurances
4.50%, 06/10/2047(e) | | | EUR | | | | 200 | | | | 294,102 | |
| | | | | | | | | | | | |
Credit Agricole Assurances SA
4.25%, 01/13/2025(e)(h) | | | EUR | | | | 200 | | | | 273,650 | |
Voya Financial, Inc.
5.65%, 05/15/2053 | | | U.S.$ | | | | 153 | | | | 161,625 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,131,398 | |
| | | | | | | | | | | | |
REITS–0.3% | | | | | | | | | | | | |
CyrusOne LP/CyrusOne Finance Corp.
1.45%, 01/22/2027 | | | EUR | | | | 100 | | | | 123,658 | |
Digital Euro Finco LLC
2.50%, 01/16/2026(e) | | | | | | | 220 | | | | 299,313 | |
Equinix, Inc.
2.875%, 02/01/2026 | | | | | | | 58 | | | | 71,284 | |
Host Hotels & Resorts LP
Series D
3.75%, 10/15/2023 | | | U.S.$ | | | | 10 | | | | 10,542 | |
Rexford Industrial Realty LP
2.125%, 12/01/2030 | | | | | | | 91 | | | | 91,365 | |
WPC Eurobond BV
2.125%, 04/15/2027 | | | EUR | | | | 148 | | | | 197,048 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 793,210 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 9,634,263 | |
| | | | | | | | | | | | |
UTILITY–0.4% | | | | | | | | | | | | |
ELECTRIC–0.4% | | | | | | | | | | | | |
Abu Dhabi National Energy Co. PJSC
4.375%, 04/23/2025(e) | | | U.S.$ | | | | 250 | | | | 282,500 | |
Enel Finance International NV
2.65%, 09/10/2024(e) | | | | | | | 308 | | | | 328,097 | |
Enel SpA
3.50%, 05/24/2080(e) | | | EUR | | | | 162 | | | | 216,214 | |
Naturgy Finance BV
4.125%, 11/18/2022(e)(h) | | | | | | | 100 | | | | 128,742 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 955,553 | |
| | | | | | | | | | | | |
Total Corporates–Investment Grade
(cost $20,893,692) | | | | | | | | | | | 22,792,366 | |
| | | | | | | | | | | | |
CORPORATES–NON-INVESTMENT GRADE–2.1% | | | | | | | | | | | | |
INDUSTRIAL–1.6% | | | | | | | | | | | | |
BASIC–0.3% | | | | | | | | | | | | |
Axalta Coating Systems LLC
3.375%, 02/15/2029(e) | | | U.S.$ | | | | 150 | | | | 150,630 | |
Ingevity Corp.
3.875%, 11/01/2028(e) | | | | | | | 88 | | | | 88,431 | |
OCI NV
3.625%, 10/15/2025(e) | | | EUR | | | | 100 | | | | 126,746 | |
Solvay SA
2.50%, 12/02/2025(h) | | | | | | | 100 | | | | 125,574 | |
19
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
SPCM SA
4.875%, 09/15/2025(e) | | | U.S.$ | | | | 200 | | | $ | 206,190 | |
WEPA Hygieneprodukte GmbH
2.875%, 12/15/2027(e) | | | EUR | | | | 120 | | | | 148,502 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 846,073 | |
| | | | | | | | | | | | |
CAPITAL GOODS–0.2% | | | | | | | | | | | | |
Rolls-Royce PLC
0.875%, 05/09/2024(e) | | | | | | | 160 | | | | 184,225 | |
TransDigm, Inc.
6.25%, 03/15/2026(e) | | | U.S.$ | | | | 110 | | | | 117,220 | |
Vertical Midco GmbH
4.375%, 07/15/2027(e) | | | EUR | | | | 140 | | | | 180,482 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 481,927 | |
| | | | | | | | | | | | |
COMMUNICATIONS–MEDIA–0.0% | | | | | | | | | | | | |
Cable One, Inc.
4.00%, 11/15/2030(e) | | | U.S.$ | | | | 53 | | | | 55,100 | |
CSC Holdings LLC
6.75%, 11/15/2021 | | | | | | | 45 | | | | 46,817 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 101,917 | |
| | | | | | | | | | | | |
COMMUNICATIONS–TELECOMMUNICATIONS–0.1% | | | | | | | | | | | | |
CenturyLink, Inc.
4.50%, 01/15/2029(e) | | | | | | | 103 | | | | 104,792 | |
Telefonica Europe BV
3.75%, 03/15/2022(e)(h) | | | EUR | | | | 100 | | | | 125,219 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 230,011 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–AUTOMOTIVE–0.2% | | | | | | | | | | | | |
Allison Transmission, Inc.
3.75%, 01/30/2031(e) | | | U.S.$ | | | | 105 | | | | 107,415 | |
Clarios Global LP/Clarios US Finance Co.
4.375%, 05/15/2026(e) | | | EUR | | | | 120 | | | | 151,990 | |
Ford Motor Co.
8.50%, 04/21/2023 | | | U.S.$ | | | | 108 | | | | 121,448 | |
Tenneco, Inc.
5.00%, 07/15/2024(e) | | | EUR | | | | 100 | | | | 123,999 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 504,852 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–ENTERTAINMENT–0.1% | | | | | | | | | | | | |
Carnival PLC
1.00%, 10/28/2029 | | | | | | | 200 | | | | 174,696 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–RESTAURANTS–0.0% | | | | | | | | | | | | |
1011778 BC ULC/New Red Finance, Inc.
3.50%, 02/15/2029(e) | | | U.S.$ | | | | 116 | | | | 116,267 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–RETAILERS–0.1% | | | | | | | | | | | | |
Dufry One BV
2.50%, 10/15/2024(e) | | | EUR | | | | 105 | | | | 123,142 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.4% | | | | | | | | | |
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC
3.50%, 02/15/2023(e) | | | U.S.$ | | | | 61 | | | | 62,489 | |
4.625%, 01/15/2027(e) | | | | | | | 46 | | | | 48,876 | |
Avantor Funding, Inc.
2.625%, 11/01/2025(e) | | | EUR | | | | 102 | | | | 127,603 | |
Catalent Pharma Solutions, Inc.
2.375%, 03/01/2028(e) | | | | | | | 165 | | | | 202,427 | |
Cheplapharm Arzneimittel GmbH
3.50%, 02/11/2027(e) | | | | | | | 120 | | | | 147,023 | |
Grifols SA
1.625%, 02/15/2025(e) | | | | | | | 200 | | | | 244,870 | |
Tenet Healthcare Corp.
4.625%, 07/15/2024 | | | U.S.$ | | | | 102 | | | | 104,499 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 937,787 | |
| | | | | | | | | | | | |
OTHER INDUSTRIAL–0.1% | | | | | | | | | | | | |
H&E Equipment Services, Inc.
3.875%, 12/15/2028(e) | | | | | | | 118 | | | | 119,233 | |
Rexel SA
2.125%, 06/15/2025(e) | | | EUR | | | | 120 | | | | 147,148 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 266,381 | |
| | | | | | | | | | | | |
TECHNOLOGY–0.0% | | | | | | | | | | | | |
Dell International LLC/EMC Corp.
7.125%, 06/15/2024(e) | | | U.S.$ | | | | 14 | | | | 14,526 | |
| | | | | | | | | | | | |
TRANSPORTATION–SERVICES–0.1% | | | | | | | | | |
Chicago Parking Meters LLC
4.93%, 12/30/2025(c) | | | | | | | 200 | | | | 230,127 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,027,706 | |
| | | | | | | | | | | | |
FINANCIAL INSTITUTIONS–0.5% | | | | | | | | | |
BANKING–0.3% | | | | | | | | | | | | |
Banco Santander SA
6.75%, 04/25/2022(e)(h) | | | EUR | | | | 200 | | | | 258,074 | |
Credit Suisse Group AG
7.50%, 12/11/2023(e)(h) | | | U.S.$ | | | | 200 | | | | 222,326 | |
Discover Financial Services
Series D
6.125%, 06/23/2025(h) | | | | | | | 117 | | | | 132,018 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 612,418 | |
| | | | | | | | | | | | |
FINANCE–0.2% | | | | | | | | | | | | |
Lincoln Financing SARL
3.625%, 04/01/2024(e) | | | EUR | | | | 120 | | | | 148,074 | |
20
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Navient Corp.
6.625%, 07/26/2021 | | | U.S.$ | | | | 170 | | | $ | 174,129 | |
SLM Corp.
4.20%, 10/29/2025 | | | | | | | 96 | | | | 101,495 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 423,698 | |
| | | | | | | | | | | | |
INSURANCE–0.0% | | | | | | | | | | | | |
Molina Healthcare, Inc.
3.875%, 11/15/2030(e) | | | | | | | 89 | | | | 95,460 | |
| | | | | | | | | | | | |
REITS–0.0% | | | | | | | | | | | | |
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc.
4.625%, 06/15/2025(e) | | | | | | | 58 | | | | 62,095 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,193,671 | |
| | | | | | | | | | | | |
Total Corporates–Non-Investment Grade
(cost $4,905,782) | | | | | | | | | | | 5,221,377 | |
| | | | | | | | | | | | |
QUASI-SOVEREIGNS–1.8% | | | | | | | | | | | | |
QUASI-SOVEREIGN BONDS–1.8% | | | | | | | | | |
CHILE–0.1% | | | | | | | | | | | | |
Corp. Nacional del Cobre de Chile
3.75%, 01/15/2031(e) | | | | | | | 200 | | | | 227,250 | |
| | | | | | | | | | | | |
CHINA–1.3% | | | | | | | | | | | | |
China Development Bank
Series 1805
4.88%, 02/09/2028 | | | CNY | | | | 14,390 | | | | 2,395,958 | |
Series 1910
3.65%, 05/21/2029 | | | | | | | 2,040 | | | | 311,566 | |
Series 2004
3.43%, 01/14/2027 | | | | | | | 1,780 | | | | 271,295 | |
Series 2009
3.39%, 07/10/2027 | | | | | | | 1,140 | | | | 173,171 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,151,990 | |
| | | | | | | | | | | | |
INDONESIA–0.2% | | | | | | | | | | | | |
Indonesia Asahan Aluminium Persero PT
4.75%, 05/15/2025(e) | | | U.S.$ | | | | 200 | | | | 220,750 | |
Perusahaan Perseroan Persero PT Perusahaan Listrik Negara
3.375%, 02/05/2030(e) | | | | | | | 210 | | | | 222,403 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 443,153 | |
| | | | | | | | | | | | |
MEXICO–0.1% | | | | | | | | | | | | |
Petroleos Mexicanos
5.95%, 01/28/2031 | | | | | | | 39 | | | | 38,903 | |
7.69%, 01/23/2050 | | | | | | | 120 | | | | 120,990 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 159,893 | |
| | | | | | | | | | | | |
UNITED ARAB EMIRATES–0.1% | | | | | | | | | | | | |
DP World Crescent Ltd.
3.75%, 01/30/2030(e) | | | | | | | 200 | | | | 217,500 | |
| | | | | | | | | | | | |
3.875%, 07/18/2029(e) | | | U.S.$ | | | | 200 | | | | 219,500 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 437,000 | |
| | | | | | | | | | | | |
Total Quasi-Sovereigns
(cost $4,132,156) | | | | | | | | | | | 4,419,286 | |
| | | | | | | | | | | | |
COLLATERALIZED MORTGAGE OBLIGATIONS–1.6% | | | | | | | | | | | | |
RISK SHARE FLOATING RATE–1.0% | | | | | | | | | |
Bellemeade Re Ltd.
Series 2019-1A, Class M1B
1.898% (LIBOR 1 Month + 1.75%), 03/25/2029(e)(i) | | | | | | | 220 | | | | 219,914 | |
Series 2019-2A, Class M2
3.248% (LIBOR 1 Month + 3.10%), 04/25/2029(e)(i) | | | | | | | 150 | | | | 150,136 | |
Connecticut Avenue Securities Trust
Series 2019-R02, Class 1M2
2.448% (LIBOR 1 Month + 2.30%), 08/25/2031(e)(i) | | | | | | | 56 | | | | 55,809 | |
Series 2019-R03, Class 1M2
2.298% (LIBOR 1 Month + 2.15%), 09/25/2031(e)(i) | | | | | | | 41 | | | | 40,947 | |
Series 2019-R04, Class 2M2
2.248% (LIBOR 1 Month + 2.10%), 06/25/2039(e)(i) | | | | | | | 75 | | | | 75,126 | |
Series 2019-R05, Class 1M2
2.148% (LIBOR 1 Month + 2.00%), 07/25/2039(e)(i) | | | | | | | 45 | | | | 45,234 | |
Series 2019-R06, Class 2M2
2.248% (LIBOR 1 Month + 2.10%), 09/25/2039(e)(i) | | | | | | | 87 | | | | 87,268 | |
Series 2019-R07, Class 1M2
2.248% (LIBOR 1 Month + 2.10%), 10/25/2039(e)(i) | | | | | | | 58 | | | | 57,801 | |
Eagle RE Ltd.
Series 2018-1, Class M1
1.848% (LIBOR 1 Month + 1.70%), 11/25/2028(e)(i) | | | | | | | 56 | | | | 55,731 | |
21
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes
Series 2014-DN3, Class M3
4.148% (LIBOR 1 Month + 4.00%), 08/25/2024(i) | | | U.S.$ | | | | 136 | | | $ | 138,487 | |
Series 2014-HQ3, Class M3
4.898% (LIBOR 1 Month + 4.75%), 10/25/2024(i) | | | | | | | 66 | | | | 66,978 | |
Series 2019-DNA3, Class M2
2.198% (LIBOR 1 Month + 2.05%), 07/25/2049(e)(i) | | | | | | | 20 | | | | 20,331 | |
Series 2019-HQA1, Class M2
2.498% (LIBOR 1 Month + 2.35%), 02/25/2049(e)(i) | | | | | | | 46 | | | | 45,491 | |
Federal National Mortgage Association Connecticut Avenue Securities
Series 2015-C01, Class 1M2
4.448% (LIBOR 1 Month + 4.30%), 02/25/2025(i) | | | | | | | 50 | | | | 51,164 | |
Series 2015-C02, Class 1M2
4.148% (LIBOR 1 Month + 4.00%), 05/25/2025(i) | | | | | | | 70 | | | | 71,587 | |
Series 2015-C02, Class 2M2
4.148% (LIBOR 1 Month + 4.00%), 05/25/2025(i) | | | | | | | 37 | | | | 37,405 | |
Series 2015-C03, Class 1M2
5.148% (LIBOR 1 Month + 5.00%), 07/25/2025(i) | | | | | | | 34 | | | | 34,773 | |
Series 2015-C03, Class 2M2
5.148% (LIBOR 1 Month + 5.00%), 07/25/2025(i) | | | | | | | 56 | | | | 56,749 | |
Series 2015-C04, Class 1M2
5.848% (LIBOR 1 Month + 5.70%), 04/25/2028(i) | | | | | | | 34 | | | | 36,484 | |
| | | | | | | | | | | | |
Series 2015-C04, Class 2M2
5.698% (LIBOR 1 Month + 5.55%), 04/25/2028(i) | | | U.S.$ | | | | 121 | | | | 127,151 | |
Series 2016-C01, Class 1M2
6.898% (LIBOR 1 Month + 6.75%), 08/25/2028(i) | | | | | | | 40 | | | | 43,234 | |
Series 2016-C02, Class 1M2
6.148% (LIBOR 1 Month + 6.00%), 09/25/2028(i) | | | | | | | 75 | | | | 79,475 | |
Series 2016-C06, Class 1M2
4.398% (LIBOR 1 Month + 4.25%), 04/25/2029(i) | | | | | | | 88 | | | | 92,454 | |
Series 2017-C01, Class 1M2
3.698% (LIBOR 1 Month + 3.55%), 07/25/2029(i) | | | | | | | 59 | | | | 60,270 | |
Series 2017-C02, Class 2M2
3.798% (LIBOR 1 Month + 3.65%), 09/25/2029(i) | | | | | | | 125 | | | | 127,480 | |
Series 2017-C05, Class 1M2
2.348% (LIBOR 1 Month + 2.20%), 01/25/2030(i) | | | | | | | 109 | | | | 109,258 | |
JP Morgan Madison Avenue Securities Trust
Series 2014-CH1, Class M2
4.398% (LIBOR 1 Month + 4.25%), 11/25/2024(i)(j) | | | | | | | 16 | | | | 15,088 | |
PMT Credit Risk Transfer Trust
Series 2019-1R, Class A
2.145% (LIBOR 1 Month + 2.00%), 03/27/2024(i)(j) | | | | | | | 85 | | | | 80,697 | |
Radnor Re Ltd.
Series 2019-1, Class M1B
2.098% (LIBOR 1 Month + 1.95%), 02/25/2029(e)(i) | | | | | | | 140 | | | | 140,500 | |
22
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
STACR Trust
Series 2018-DNA3, Class M2
2.248% (LIBOR 1 Month + 2.10%), 09/25/2048(e)(i) | | | U.S.$ | | | | 174 | | | $ | 172,022 | |
Wells Fargo Credit Risk Transfer Securities Trust
Series 2015-WF1, Class 1M2
5.398% (LIBOR 1 Month + 5.25%), 11/25/2025(i)(j) | | | | | | | 73 | | | | 71,383 | |
Series 2015-WF1, Class 2M2
5.648% (LIBOR 1 Month + 5.50%), 11/25/2025(i)(j) | | | | | | | 21 | | | | 20,501 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,486,928 | |
| | | | | | | | | | | | |
AGENCY FLOATING RATE–0.4% | | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. REMICs
Series 4416, Class BS
5.941% (6.10%–LIBOR 1 Month), 12/15/2044(i)(k) | | | | | | | 423 | | | | 84,254 | |
Series 4693, Class SL
5.991% (6.15%–LIBOR 1 Month), 06/15/2047(i)(k) | | | | | | | 425 | | | | 97,684 | |
Series 4719, Class JS
5.991% (6.15%–LIBOR 1 Month), 09/15/2047(i)(k) | | | | | | | 301 | | | | 51,909 | |
Series 4727, Class SA
6.041% (6.20%–LIBOR 1 Month), 11/15/2047(i)(k) | | | | | | | 445 | | | | 90,996 | |
Federal National Mortgage Association REMICs
Series 2011-131, Class ST
6.392% (6.54%–LIBOR 1 Month), 12/25/2041(i)(k) | | | | | | | 213 | | | | 51,202 | |
Series 2016-106, Class ES
5.852% (6.00%–LIBOR 1 Month), 01/25/2047(i)(k) | | | | | | | 399 | | | | 74,308 | |
Series 2017-16, Class SG
5.902% (6.05%–LIBOR 1 Month), 03/25/2047(i)(k) | | | | | | | 400 | | | | 81,464 | |
| | | | | | | | | | | | |
Series 2017-81, Class SA
6.052% (6.20%–LIBOR 1 Month), 10/25/2047(i)(k) | | | U.S.$ | | | | 429 | | | | 96,463 | |
Series 2017-97, Class LS
6.052% (6.20%–LIBOR 1 Month), 12/25/2047(i)(k) | | | | | | | 349 | | | | 86,583 | |
Government National Mortgage Association
Series 2017-134, Class SE
6.048% (6.20%–LIBOR 1 Month), 09/20/2047(i)(k) | | | | | | | 272 | | | | 46,729 | |
Series 2017-65, Class ST
5.998% (6.15%–LIBOR 1 Month), 04/20/2047(i)(k) | | | | | | | 390 | | | | 83,204 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 844,796 | |
| | | | | | | | | | | | |
NON-AGENCY FIXED RATE–0.1% | | | | | | | | | | | | |
Alternative Loan Trust
Series 2005-20CB, Class 3A6
5.50%, 07/25/2035 | | | | | | | 19 | | | | 16,945 | |
Series 2006-24CB, Class A16
5.75%, 08/25/2036 | | | | | | | 91 | | | | 72,449 | |
Series 2006-28CB, Class A14
6.25%, 10/25/2036 | | | | | | | 66 | | | | 48,769 | |
Series 2006-J1, Class 1A13
5.50%, 02/25/2036 | | | | | | | 43 | | | | 39,916 | |
Chase Mortgage Finance Trust
Series 2007-S5, Class 1A17
6.00%, 07/25/2037 | | | | | | | 30 | | | | 21,649 | |
Countrywide Home Loan Mortgage Pass-Through Trust
Series 2006-10, Class 1A8
6.00%, 05/25/2036 | | | | | | | 42 | | | | 31,142 | |
Series 2006-13, Class 1A19
6.25%, 09/25/2036 | | | | | | | 21 | | | | 13,752 | |
First Horizon Alternative Mortgage Securities Trust
Series 2006-FA3, Class A9
6.00%, 07/25/2036 | | | | | | | 81 | | | | 55,404 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 300,026 | |
| | | | | | | | | | | | |
23
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING RATE–0.1% | | | | | | | | | |
Deutsche Alt-A Securities Mortgage Loan Trust
Series 2006-AR4, Class A2
0.528% (LIBOR 1 Month + 0.19%), 12/25/2036(i) | | | U.S.$ | | | | 212 | | | $ | 107,054 | |
HomeBanc Mortgage Trust
Series 2005-1, Class A1
0.648% (LIBOR 1 Month + 0.25%), 03/25/2035(i) | | | | | | | 52 | | | | 46,871 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 153,925 | |
| | | | | | | | | | | | |
Total Collateralized Mortgage Obligations
(cost $3,781,478) | | | | | | | | | | | 3,785,675 | |
| | | | | | | | | | | | |
MORTGAGE PASS-THROUGHS–1.6% | | | | | | | | | |
AGENCY FIXED RATE 30-YEAR–1.6% | | | | | | | | | |
Federal Home Loan Mortgage Corp.
Series 2019
3.50%, 06/01/2049-10/01/2049 | | | | | | | 719 | | | | 779,339 | |
Series 2020
2.50%, 07/01/2050 | | | | | | | 136 | | | | 146,089 | |
Federal Home Loan Mortgage Corp. Gold
Series 2018
4.00%, 08/01/2048 | | | | | | | 53 | | | | 57,301 | |
Series 2019
4.50%, 02/01/2049 | | | | | | | 183 | | | | 202,589 | |
Federal National Mortgage Association
Series 2012
3.50%, 11/01/2042 | | | | | | | 298 | | | | 328,964 | |
Series 2013
3.50%, 04/01/2043 | | | | | | | 192 | | | | 212,120 | |
Series 2018
3.50%, 02/01/2048 | | | | | | | 175 | | | | 185,477 | |
4.50%, 09/01/2048 | | | | | | | 390 | | | | 428,794 | |
Series 2019
3.50%, 11/01/2049 | | | | | | | 175 | | | | 188,388 | |
Series 2020
2.50%, 07/01/2050 | | | | | | | 773 | | | | 833,740 | |
Uniform Mortgage-Backed Security
Series 2021
1.50%, 01/01/2051, TBA | | | | | | | 399 | | | | 403,177 | |
| | | | | | | | | | | | |
Total Mortgage Pass-Throughs
(cost $3,650,758) | | | | | | | | | | | 3,765,978 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
COMMERCIAL MORTGAGE-BACKED SECURITIES–0.9% | | | | | | | | | | | | |
NON-AGENCY FLOATING RATE CMBS–0.6% | | | | | | | | | | | | |
Ashford Hospitality Trust
Series 2018-KEYS, Class A
1.159% (LIBOR 1 Month + 1.00%), 06/15/2035(e)(i) | | | U.S.$ | | | | 200 | | | | 193,895 | |
BAMLL Commercial Mortgage Securities Trust Series 2017-SCH, Class AF
1.159% (LIBOR 1 Month + 1.00%), 11/15/2033(e)(i) | | | | | | | 375 | | | | 358,665 | |
BHMS
Series 2018-ATLS, Class A
1.409% (LIBOR 1 Month + 1.25%), 07/15/2035(e)(i) | | | | | | | 158 | | | | 153,688 | |
BX Trust
Series 2018-EXCL, Class A
1.246% (LIBOR 1 Month + 1.09%), 09/15/2037(e)(i) | | | | | | | 163 | | | | 150,779 | |
DBWF Mortgage Trust
Series 2018-GLKS, Class A
1.182% (LIBOR 1 Month + 1.03%), 12/19/2030(e)(i) | | | | | | | 166 | | | | 163,544 | |
Invitation Homes Trust
Series 2018-SFR4, Class A
1.253% (LIBOR 1 Month + 1.10%), 01/17/2038(e)(i) | | | | | | | 213 | | | | 214,090 | |
Morgan Stanley Capital I Trust
Series 2015-XLF2, Class SNMA
2.109% (LIBOR 1 Month + 1.95%), 11/15/2026(i)(j) | | | | | | | 90 | | | | 79,891 | |
Starwood Retail Property Trust
Series 2014-STAR, Class A
1.629% (LIBOR 1 Month + 1.47%), 11/15/2027(e)(i) | | | | | | | 176 | | | | 115,987 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,430,539 | |
| | | | | | | | | | | | |
24
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
NON-AGENCY
FIXED RATE CMBS–0.3% | |
GS Mortgage Securities Trust
Series 2013-G1, Class A2
3.557%, 04/10/2031(e) | | | U.S.$ | | | | 276 | | | $ | 274,006 | |
JP Morgan Chase Commercial Mortgage Securities Trust
Series 2012-C6, Class E
5.152%, 05/15/2045(e) | | | | | | | 119 | | | | 70,757 | |
LSTAR Commercial Mortgage Trust
Series 2016-4, Class A2
2.579%, 03/10/2049(e) | | | | | | | 143 | | | | 145,473 | |
Wells Fargo Commercial Mortgage Trust
Series 2015-SG1, Class C
4.462%, 09/15/2048 | | | | | | | 197 | | | | 172,600 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 662,836 | |
| | | | | | | | | | | | |
Total Commercial Mortgage-Backed Securities
(cost $2,268,259) | | | | | | | | | | | 2,093,375 | |
| | | | | | | | | | | | |
EMERGING MARKETS–CORPORATE BONDS–0.4% | | | | | | | | | |
INDUSTRIAL–0.4% | | | | | | | | | | | | |
CAPITAL GOODS–0.1% | | | | | | | | | | | | |
Embraer Netherlands Finance BV
6.95%, 01/17/2028(e) | | | | | | | 200 | | | | 226,000 | |
| | | | | | | | | | | | |
COMMUNICATIONS–MEDIA–0.1% | | | | | | | | | | | | |
Globo Comunicacao e Participacoes SA
4.875%, 01/22/2030(e) | | | | | | | 200 | | | | 214,062 | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.1% | | | | | | | | | | | | |
BRF GmbH
4.35%, 09/29/2026(e) | | | | | | | 200 | | | | 210,750 | |
| | | | | | | | | | | | |
ENERGY–0.0% | | | | | | | | | | | | |
Leviathan Bond Ltd.
6.125%, 06/30/2025(e) | | | | | | | 46 | | | | 50,427 | |
| | | | | | | | | | | | |
TRANSPORTATION–SERVICES–0.1% | | | | | | | | | |
Rumo Luxembourg SARL
5.875%, 01/18/2025(e) | | | | | | | 200 | | | | 211,563 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 912,802 | |
| | | | | | | | | | | | |
UTILITY–0.0% | | | | | | | | | | | | |
ELECTRIC–0.0% | | | | | | | | | | | | |
Terraform Global Operating LLC
6.125%, 03/01/2026(j) | | | | | | | 14 | | | | 14,375 | |
| | | | | | | | | | | | |
Total Emerging Markets–Corporate Bonds
(cost $893,196) | | | | | | | | | | | 927,177 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
COLLATERALIZED LOAN OBLIGATIONS–0.4% | | | | | | | | | |
CLO–FLOATING RATE–0.4% | | | | | | | | | | | | |
ICG US CLO Ltd.
Series 2015-1A, Class A1R
1.358% (LIBOR 3 Month + 1.14%), 10/19/2028(e)(i) | | | U.S.$ | | | | 300 | | | | 299,999 | |
Octagon Loan Funding Ltd.
Series 2014-1A, Class ARR
1.40% (LIBOR 3 Month + 1.18%), 11/18/2031(e)(i) | | | | | | | 320 | | | | 320,003 | |
TIAA CLO IV Ltd.
Series 2018-1A, Class A1A
1.448% (LIBOR 3 Month + 1.23%), 01/20/2032(e)(i) | | | | | | | 250 | | | | 248,961 | |
| | | | | | | | | | | | |
Total Collateralized Loan Obligations
(cost $870,000) | | | | | | | | | | | 868,963 | |
| | | | | | | | | | | | |
GOVERNMENTS–SOVEREIGN BONDS–0.3% | | | | | | | | | |
CHILE–0.1% | | | | | | | | | | | | |
Chile Government International Bond
1.625%, 01/30/2025 | | | EUR | | | | 125 | | | | 162,632 | |
| | | | | | | | | | | | |
MEXICO–0.1% | | | | | | | | | | | | |
Mexico Government International Bond
4.75%, 04/27/2032 | | | U.S.$ | | | | 280 | | | | 336,525 | |
| | | | | | | | | | | | |
PERU–0.1% | | | | | | | | | | | | |
Peruvian Government International Bond
2.392%, 01/23/2026 | | | | | | | 205 | | | | 218,120 | |
| | | | | | | | | | | | |
Total Governments–Sovereign Bonds
(cost $665,585) | | | | | | | | | | | 717,277 | |
| | | | | | | | | | | | |
EMERGING MARKETS–SOVEREIGNS–0.3% | | | | | | | | | |
IVORY COAST–0.1% | | | | | | | | | | | | |
Ivory Coast Government International Bond
5.875%, 10/17/2031(e) | | | EUR | | | | 200 | | | | 269,908 | |
| | | | | | | | | | | | |
NIGERIA–0.1% | | | | | | | | | | | | |
Nigeria Government International Bond
6.75%, 01/28/2021(e) | | | U.S.$ | | | | 200 | | | | 199,938 | |
| | | | | | | | | | | | |
25
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
SOUTH AFRICA–0.1% | | | | | | | | | | | | |
Republic of South Africa Government International Bond
4.30%, 10/12/2028(d) | | | U.S.$ | | | | 230 | | | $ | 239,200 | |
| | | | | | | | | | | | |
Total Emerging Markets–Sovereigns
(cost $603,913) | | | | | | | | | | | 709,046 | |
| | | | | | | | | | | | |
COVERED BONDS–0.2% | | | | | | | | | | | | |
Turkiye Vakiflar Bankasi TAO
2.375%, 05/04/2021(e) | | | EUR | | | | 140 | | | | 170,597 | |
UBS AG/London
4.00%, 04/08/2022(e) | | | | | | | 158 | | | | 203,934 | |
1.375%, 04/16/2021(e) | | | | | | | 140 | | | | 171,937 | |
| | | | | | | | | | | | |
Total Covered Bonds
(cost $502,554) | | | | | | | | | | | 546,468 | |
| | | | | | | | | | | | |
EMERGING MARKETS–TREASURIES–0.1% | | | | | | | | | | | | |
SOUTH AFRICA–0.1% | | | | | | | | | | | | |
Republic of South Africa Government Bond
Series 2030
8.00%, 01/31/2030
(cost $251,095) | | | ZAR | | | | 5,315 | | | | 344,860 | |
| | | | | | | | | | | | |
GOVERNMENTS–SOVEREIGN AGENCIES–0.1% | | | | | | | | | |
CANADA–0.1% | | | | | | | | | | | | |
Canada Housing Trust No. 1 1.80%, 12/15/2024(e) | | | CAD | | | | 200 | | | | 165,066 | |
1.95%, 12/15/2025(e) | | | | | | | 195 | | | | 163,097 | |
| | | | | | | | | | | | |
Total Governments–Sovereign Agencies
(cost $325,981) | | | | | | | | | | | 328,163 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
ASSET-BACKED SECURITIES–0.0% | | | | | | | | | |
AUTOS–FIXED RATE–0.0% | | | | | | | | | | | | |
Flagship Credit Auto Trust
Series 2016-4, Class D
3.89%, 11/15/2022(e)
(cost $99,994) | | | U.S.$ | | | | 100 | | | | 101,521 | |
| | | | | | | | | | | | |
SHORT-TERM INVESTMENTS–2.2% | | | | | | | | | |
GOVERNMENTS–TREASURIES–1.5% | | | | | | | | | |
JAPAN–1.5% | | | | | | | | | | | | |
Japan Treasury Discount Bill
Series 953
Zero Coupon, 03/01/2021 | | | JPY | | | | 295,200 | | | | 2,859,399 | |
Series 956
Zero Coupon, 03/15/2021 | | | | | | | 85,000 | | | | 823,369 | |
| | | | | | | | | | | | |
Total Governments–Treasuries
(cost $3,642,650) | | | | | | | | | | | 3,682,768 | |
| | | | | |
| | | | Shares | | | | |
INVESTMENT COMPANIES–0.7% | | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 0.03%(f)(g)(l)
(cost $1,673,235) | | | | | | | 1,673,235 | | | | 1,673,235 | |
| | | | | | | | | |
Total Short-Term Investments
(cost $5,315,885) | | | | | | | | | | | 5,356,003 | |
| | | | | |
TOTAL INVESTMENTS–100.3%
(cost $207,463,105) | | | | | | | | | | | 244,411,705 | |
Other assets less liabilities–(0.3)% | | | | | | | | | | | (732,381 | ) |
| | | | | |
NET ASSETS–100.0% | | | | | | | | | | $ | 243,679,324 | |
| | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | |
| Description | | Number of
Contracts | | | Expiration
Month | | | Current
Notional | | | Value and
Unrealized
Appreciation/
(Depreciation) | |
Purchased Contracts | | | | | | | | | | | | | | | | |
Euro-BOBL Futures | | | 26 | | | | March 2021 | | | $ | 4,293,709 | | | $ | 4,733 | |
Euro-Schatz Futures | | | 5 | | | | March 2021 | | | | 685,804 | | | | (311 | ) |
U.S. T-Note 5 Yr (CBT) Futures | | | 14 | | | | March 2021 | | | | 1,766,297 | | | | 4,029 | |
|
Sold Contracts | |
Euro-Bund Futures | | | 11 | | | | March 2021 | | | | 2,387,153 | | | | (6,109 | ) |
U.S. 10 Yr Ultra Futures | | | 8 | | | | March 2021 | | | | 1,250,875 | | | | 3,927 | |
U.S. Ultra Bond (CBT) Futures | | | 5 | | | | March 2021 | | | | 1,067,813 | | | | 5,290 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 11,559 | |
| | | | | | | | | | | | | | | | |
26
| | |
| |
| | | AB 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) | |
Bank of America, NA | | | RUB | | | | 40,785 | | | | USD | | | | 552 | | | | 01/22/2021 | | | $ | 1,386 | |
Barclays Bank PLC | | | USD | | | | 575 | | | | CNY | | | | 3,766 | | | | 02/10/2021 | | | | 1,839 | |
Barclays Bank PLC | | | USD | | | | 238 | | | | IDR | | | | 3,531,771 | | | | 01/15/2021 | | | | 15,610 | |
BNP Paribas SA | | | NOK | | | | 3,888 | | | | USD | | | | 408 | | | | 01/15/2021 | | | | (45,480 | ) |
BNP Paribas SA | | | AUD | | | | 879 | | | | USD | | | | 644 | | | | 01/12/2021 | | | | (34,038 | ) |
BNP Paribas SA | | | SGD | | | | 818 | | | | USD | | | | 613 | | | | 01/07/2021 | | | | (5,211 | ) |
BNP Paribas SA | | | USD | | | | 1,457 | | | | SGD | | | | 1,961 | | | | 01/07/2021 | | | | 26,666 | |
BNP Paribas SA | | | USD | | | | 662 | | | | SEK | | | | 5,611 | | | | 01/15/2021 | | | | 20,077 | |
BNP Paribas SA | | | USD | | | | 552 | | | | ZAR | | | | 8,104 | | | | 02/04/2021 | | | | (2,893 | ) |
BNP Paribas SA | | | USD | | | | 571 | | | | ZAR | | | | 8,702 | | | | 02/04/2021 | | | | 18,900 | |
Citibank, NA | | | IDR | | | | 9,172,354 | | | | USD | | | | 651 | | | | 01/15/2021 | | | | (7,993 | ) |
Citibank, NA | | | COP | | | | 1,976,748 | | | | USD | | | | 556 | | | | 01/14/2021 | | | | (22,921 | ) |
Citibank, NA | | | JPY | | | | 1,055,879 | | | | USD | | | | 10,145 | | | | 02/26/2021 | | | | (86,685 | ) |
Citibank, NA | | | KRW | | | | 896,039 | | | | USD | | | | 820 | | | | 01/14/2021 | | | | (4,114 | ) |
Citibank, NA | | | CLP | | | | 1,471,700 | | | | USD | | | | 1,937 | | | | 01/14/2021 | | | | (134,193 | ) |
Citibank, NA | | | CNY | | | | 43,138 | | | | USD | | | | 6,582 | | | | 02/10/2021 | | | | (23,086 | ) |
Citibank, NA | | | PEN | | | | 499 | | | | USD | | | | 139 | | | | 01/14/2021 | | | | 1,020 | |
Citibank, NA | | | USD | | | | 233 | | | | PEN | | | | 839 | | | | 01/14/2021 | | | | (1,741 | ) |
Citibank, NA | | | USD | | | | 881 | | | | CNY | | | | 5,746 | | | | 02/10/2021 | | | | (1,118 | ) |
Citibank, NA | | | USD | | | | 1,630 | | | | CLP | | | | 1,226,062 | | | | 01/14/2021 | | | | 95,689 | |
Citibank, NA | | | USD | | | | 409 | | | | KRW | | | | 465,430 | | | | 01/14/2021 | | | | 18,655 | |
Citibank, NA | | | USD | | | | 732 | | | | COP | | | | 2,548,046 | | | | 01/14/2021 | | | | 13,668 | |
Credit Suisse International | | | SGD | | | | 981 | | | | USD | | | | 718 | | | | 01/07/2021 | | | | (24,591 | ) |
Credit Suisse International | | | USD | | | | 730 | | | | SGD | | | | 984 | | | | 01/07/2021 | | | | 14,969 | |
Credit Suisse International | | | USD | | | | 203 | | | | TRY | | | | 1,604 | | | | 01/21/2021 | | | | 11,910 | |
Goldman Sachs Bank USA | | | TWD | | | | 18,390 | | | | USD | | | | 655 | | | | 01/27/2021 | | | | (2,006 | ) |
Goldman Sachs Bank USA | | | NOK | | | | 8,844 | | | | USD | | | | 963 | | | | 01/15/2021 | | | | (68,906 | ) |
Goldman Sachs Bank USA | | | USD | | | | 722 | | | | SGD | | | | 981 | | | | 01/07/2021 | | | | 20,587 | |
Goldman Sachs Bank USA | | | USD | | | | 1,311 | | | | RUB | | | | 100,998 | | | | 01/22/2021 | | | | 52,855 | |
JPMorgan Chase Bank, NA | | | SEK | | | | 8,164 | | | | USD | | | | 947 | | | | 01/15/2021 | | | | (45,360 | ) |
JPMorgan Chase Bank, NA | | | SGD | | | | 1,856 | | | | USD | | | | 1,376 | | | | 01/07/2021 | | | | (28,254 | ) |
JPMorgan Chase Bank, NA | | | GBP | | | | 651 | | | | USD | | | | 870 | | | | 01/21/2021 | | | | (21,029 | ) |
JPMorgan Chase Bank, NA | | | USD | | | | 759 | | | | CHF | | | | 675 | | | | 01/29/2021 | | | | 4,464 | |
JPMorgan Chase Bank, NA | | | USD | | | | 669 | | | | AUD | | | | 905 | | | | 01/12/2021 | | | | 28,885 | |
JPMorgan Chase Bank, NA | | | USD | | | | 826 | | | | CNY | | | | 5,400 | | | | 02/10/2021 | | | | 343 | |
JPMorgan Chase Bank, NA | | | USD | | | | 657 | | | | NOK | | | | 5,810 | | | | 01/15/2021 | | | | 20,924 | |
JPMorgan Chase Bank, NA | | | USD | | | | 729 | | | | SEK | | | | 6,286 | | | | 01/15/2021 | | | | 35,173 | |
Morgan Stanley & Co., Inc. | | | JPY | | | | 150,922 | | | | USD | | | | 1,449 | | | | 02/26/2021 | | | | (13,826 | ) |
Morgan Stanley & Co., Inc. | | | NOK | | | | 7,813 | | | | USD | | | | 878 | | | | 01/15/2021 | | | | (32,976 | ) |
Morgan Stanley & Co., Inc. | | | SEK | | | | 10,070 | | | | USD | | | | 1,148 | | | | 01/15/2021 | | | | (76,577 | ) |
Morgan Stanley & Co., Inc. | | | BRL | | | | 4,023 | | | | USD | | | | 774 | | | | 01/05/2021 | | | | (373 | ) |
Morgan Stanley & Co., Inc. | | | GBP | | | | 3,128 | | | | USD | | | | 4,148 | | | | 01/21/2021 | | | | (130,138 | ) |
Morgan Stanley & Co., Inc. | | | MYR | | | | 1,237 | | | | USD | | | | 297 | | | | 03/25/2021 | | | | (12,146 | ) |
Morgan Stanley & Co., Inc. | | | NZD | | | | 1,158 | | | | USD | | | | 826 | | | | 03/05/2021 | | | | (7,824 | ) |
Morgan Stanley & Co., Inc. | | | AUD | | | | 1,091 | | | | USD | | | | 828 | | | | 01/12/2021 | | | | (13,218 | ) |
Morgan Stanley & Co., Inc. | | | USD | | | | 751 | | | | BRL | | | | 4,023 | | | | 01/05/2021 | | | | 23,503 | |
Morgan Stanley & Co., Inc. | | | USD | | | | 1,607 | | | | NOK | | | | 14,733 | | | | 01/15/2021 | | | | 110,953 | |
Natwest Markets PLC | | | CNY | | | | 1,026 | | | | USD | | | | 156 | | | | 02/10/2021 | | | | (588 | ) |
27
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
Natwest Markets PLC | | | USD | | | | 652 | | | | INR | | | | 48,735 | | | | 01/15/2021 | | | $ | 14,972 | |
Standard Chartered Bank | | | INR | | | | 29,773 | | | | USD | | | | 401 | | | | 01/15/2021 | | | | (5,987 | ) |
Standard Chartered Bank | | | USD | | | | 663 | | | | TWD | | | | 18,661 | | | | 01/27/2021 | | | | 3,731 | |
Standard Chartered Bank | | | USD | | | | 558 | | | | INR | | | | 41,450 | | | | 01/15/2021 | | | | 8,838 | |
Standard Chartered Bank | | | USD | | | | 789 | | | | KRW | | | | 878,905 | | | | 01/14/2021 | | | | 19,183 | |
Standard Chartered Bank | | | USD | | | | 1,202 | | | | IDR | | | | 17,283,590 | | | | 01/15/2021 | | | | 39,342 | |
State Street Bank & Trust Co. | | | JPY | | | | 89,756 | | | | USD | | | | 866 | | | | 02/26/2021 | | | | (3,897 | ) |
State Street Bank & Trust Co. | | | ZAR | | | | 19,197 | | | | USD | | | | 1,239 | | | | 02/04/2021 | | | | (61,424 | ) |
State Street Bank & Trust Co. | | | AUD | | | | 4,429 | | | | USD | | | | 3,193 | | | | 01/12/2021 | | | | (221,616 | ) |
State Street Bank & Trust Co. | | | JPY | | | | 4,562 | | | | USD | | | | 44 | | | | 02/26/2021 | | | | 152 | |
State Street Bank & Trust Co. | | | CHF | | | | 1,346 | | | | USD | | | | 1,483 | | | | 01/29/2021 | | | | (38,060 | ) |
State Street Bank & Trust Co. | | | MXN | | | | 1,634 | | | | USD | | | | 82 | | | | 02/25/2021 | | | | 506 | |
State Street Bank & Trust Co. | | | SEK | | | | 1,200 | | | | USD | | | | 139 | | | | 01/15/2021 | | | | (7,367 | ) |
State Street Bank & Trust Co. | | | DKK | | | | 559 | | | | USD | | | | 88 | | | | 01/15/2021 | | | | (3,323 | ) |
State Street Bank & Trust Co. | | | NOK | | | | 328 | | | | USD | | | | 36 | | | | 01/15/2021 | | | | (2,742 | ) |
State Street Bank & Trust Co. | | | SGD | | | | 297 | | | | USD | | | | 223 | | | | 01/07/2021 | | | | (1,834 | ) |
State Street Bank & Trust Co. | | | CAD | | | | 271 | | | | USD | | | | 212 | | | | 02/18/2021 | | | | (457 | ) |
State Street Bank & Trust Co. | | | EUR | | | | 183 | | | | USD | | | | 224 | | | | 03/17/2021 | | | | (208 | ) |
State Street Bank & Trust Co. | | | ILS | | | | 38 | | | | USD | | | | 11 | | | | 01/21/2021 | | | | (497 | ) |
State Street Bank & Trust Co. | | | GBP | | | | 34 | | | | USD | | | | 46 | | | | 01/21/2021 | | | | (221 | ) |
State Street Bank & Trust Co. | | | NZD | | | | 9 | | | | USD | | | | 6 | | | | 03/05/2021 | | | | (64 | ) |
State Street Bank & Trust Co. | | | USD | | | | 124 | | | | AUD | | | | 173 | | | | 01/12/2021 | | | | 9,432 | |
State Street Bank & Trust Co. | | | USD | | | | 1,310 | | | | GBP | | | | 980 | | | | 01/21/2021 | | | | 30,831 | |
State Street Bank & Trust Co. | | | USD | | | | 11 | | | | ILS | | | | 38 | | | | 01/21/2021 | | | | 503 | |
State Street Bank & Trust Co. | | | USD | | | | 205 | | | | CAD | | | | 262 | | | | 02/18/2021 | | | | 141 | |
State Street Bank & Trust Co. | | | USD | | | | 573 | | | | CHF | | | | 511 | | | | 01/29/2021 | | | | 4,478 | |
State Street Bank & Trust Co. | | | USD | | | | 12 | | | | HKD | | | | 96 | | | | 02/24/2021 | | | | 0 | |
State Street Bank & Trust Co. | | | USD | | | | 823 | | | | SEK | | | | 6,940 | | | | 01/15/2021 | | | | 20,258 | |
State Street Bank & Trust Co. | | | USD | | | | 124 | | | | SGD | | | | 169 | | | | 01/07/2021 | | | | 3,419 | |
State Street Bank & Trust Co. | | | USD | | | | 457 | | | | EUR | | | | 375 | | | | 03/17/2021 | | | | 1,146 | |
State Street Bank & Trust Co. | | | USD | | | | 488 | | | | PLN | | | | 1,797 | | | | 03/24/2021 | | | | (6,573 | ) |
State Street Bank & Trust Co. | | | USD | | | | 92 | | | | JPY | | | | 9,558 | | | | 02/26/2021 | | | | 560 | |
State Street Bank & Trust Co. | | | USD | | | | 765 | | | | BRL | | | | 4,023 | | | | 02/02/2021 | | | | 9,117 | |
State Street Bank & Trust Co. | | | USD | | | | 598 | | | | ZAR | | | | 9,012 | | | | 02/04/2021 | | | | 12,660 | |
State Street Bank & Trust Co. | | | USD | | | | 400 | | | | MXN | | | | 8,103 | | | | 02/25/2021 | | | | 5,257 | |
UBS AG | | | COP | | | | 2,237,895 | | | | USD | | | | 597 | | | | 01/14/2021 | | | | (57,812 | ) |
UBS AG | | | EUR | | | | 11,290 | | | | USD | | | | 13,792 | | | | 03/17/2021 | | | | (23,429 | ) |
UBS AG | | | CAD | | | | 4,308 | | | | USD | | | | 3,365 | | | | 02/18/2021 | | | | (19,823 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | (580,017 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Rate Type | | | | | | | | | | | |
Notional
Amount (000) | | | Termination
Date | | | Payments
made
by the
Fund | | Payments
received
by the
Fund | | Payment
Frequency
Paid/
Received | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
| BRL | | | 2,816 | | | | 01/02/2023 | | | 1 Day CDI | | 3.975% | | Maturity | | $ | 1,429 | | | $ | –0– | | | $ | 1,429 | |
| BRL | | | 2,815 | | | | 01/02/2023 | | | 1 Day CDI | | 4.590% | | Maturity | | | 7,757 | | | | –0– | | | | 7,757 | |
| BRL | | | 2,592 | | | | 01/02/2023 | | | 1 Day CDI | | 4.175% | | Maturity | | | 3,339 | | | | –0– | | | | 3,339 | |
28
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Rate Type | | | | | | | | | | | | |
Notional
Amount (000) | | | Termination
Date | | | Payments
made
by the
Fund | | | Payments
received
by the
Fund | | | Payment
Frequency
Paid/
Received | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
| BRL | | | 2,577 | | | | 01/02/2023 | | | | 1 Day CDI | | | | 4.053% | | | Maturity | | $ | 2,104 | | | $ | –0– | | | $ | 2,104 | |
| CAD | | | 3,780 | | | | 05/22/2024 | | | | 3 Month CDOR | | | | 1.980% | | | Semi-Annual/
Semi-Annual | | | 139,416 | | | | 2 | | | | 139,414 | |
| USD | | | 2,420 | | | | 10/01/2025 | | | | 0.329% | | | | 3 Month LIBOR | | | Semi-Annual/
Quarterly | | | 7,474 | | | | –0– | | | | 7,474 | |
| EUR | | | 540 | | | | 09/30/2050 | | | | 6 Month EURIBOR | | | | (0.017)% | | | Semi-Annual/
Annual | | | 1,302 | | | | –0– | | | | 1,302 | |
| EUR | | | 540 | | | | 09/30/2050 | | | | 0.122% | | | | 6 Month EURIBOR | | | Annual/
Semi-Annual | | | (29,503 | ) | | | –0– | | | | (29,503 | ) |
| EUR | | | 550 | | | | 11/10/2050 | | | | 6 Month EURIBOR | | | | (0.043)% | | | Semi-Annual/
Annual | | | (4,318 | ) | | | –0– | | | | (4,318 | ) |
| EUR | | | 550 | | | | 11/10/2050 | | | | 0.022% | | | | 6 Month EURIBOR | | | Annual/
Semi-Annual | | | (8,898 | ) | | | 6,597 | | | | (15,495 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | $ | 120,102 | | | $ | 6,599 | | | $ | 113,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty &
Referenced Obligation | | Fixed
Rate
(Pay)
Receive | | | Payment
Frequency | | | Implied
Credit
Spread at
December 31,
2020 | | | Notional
Amount
(000) | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | % | | | Monthly | | | | 15.00 | % | | | USD | | | | 60 | | | $ | (15,990 | ) | | $ | (7,769 | ) | | $ | (8,221 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 55 | | | | (14,657 | ) | | | (7,291 | ) | | | (7,366 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 69 | | | | (18,382 | ) | | | (10,342 | ) | | | (8,040 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 11 | | | | (2,931 | ) | | | (1,730 | ) | | | (1,201 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 70 | | | | (18,650 | ) | | | (10,186 | ) | | | (8,464 | ) |
Deutsche Bank AG | |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 9 | | | | (2,398 | ) | | | (504 | ) | | | (1,894 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (916 | ) | | | (1,216 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 53 | | | | (14,124 | ) | | | (5,919 | ) | | | (8,205 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 52 | | | | (13,858 | ) | | | (5,805 | ) | | | (8,053 | ) |
Goldman Sachs International | |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 4 | | | | (1,066 | ) | | | (350 | ) | | | (716 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (713 | ) | | | (1,419 | ) |
29
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty &
Referenced Obligation | | Fixed
Rate
(Pay)
Receive | | | Payment
Frequency | | | Implied
Credit
Spread at
December 31,
2020 | | | Notional
Amount
(000) | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Sale Contracts (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | % | | | Monthly | | | | 15.00 | % | | | USD | | | | 8 | | | $ | (2,133 | ) | | $ | (772 | ) | | $ | (1,361 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 15 | | | | (3,997 | ) | | | (1,581 | ) | | | (2,416 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 78 | | | | (20,787 | ) | | | (10,365 | ) | | | (10,422 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 53 | | | | (14,124 | ) | | | (5,513 | ) | | | (8,611 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 75 | | | | (19,982 | ) | | | (11,257 | ) | | | (8,725 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 58 | | | | (15,452 | ) | | | (9,256 | ) | | | (6,196 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 82 | | | | (21,846 | ) | | | (13,274 | ) | | | (8,572 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 5 | | | | (1,332 | ) | | | (741 | ) | | | (591 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | $ (205,973) | | | | $ (104,284) | | | | $ (101,689) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
INFLATION (CPI) SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Rate Type | | | | | | | | | | | | | |
| Swap Counterparty | | Notional
Amount
(000) | | | Termination
Date | | | Payments
made
by the
Fund | | | Payments
received
by the
Fund | | | Payment
Frequency
Paid
Received | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Bank of America, NA | | | USD | | | | 10,000 | | | | 07/11/2024 | | | | 2.416 | % | | | CPI | # | | | Maturity | | | $ | (310,311 | ) | | $ | –0– | | | $ | (310,311 | ) |
| # | | Variable interest rate based on the rate of inflation as determined by the Consumer Price Index (CPI). |
| (a) | | Non-income producing security. |
| (b) | | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (c) | | 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. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the aggregate market value of these securities amounted to $35,715,851 or 14.7% of net assets. |
| (f) | | Affiliated investments. |
| (g) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
| (h) | | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
| (i) | | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at December 31, 2020. |
| (j) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 0.12% of net assets as of December 31, 2020, are considered illiquid and restricted. Additional information regarding such securities follows: |
| | | | | | | | | | | | | | | | |
| 144A/Restricted & Illiquid Securities | | Acquisition
Date | | | Cost | | | Market
Value | | | Percentage
of Net Assets | |
JP Morgan Madison Avenue Securities Trust Series 2014-CH1, Class M2
4.398%, 11/25/2024 | | | 11/06/2015 | | | $ | 15,596 | | | $ | 15,088 | | | | 0.01 | % |
30
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| 144A/Restricted & Illiquid Securities | | Acquisition
Date | | | Cost | | | Market
Value | | | Percentage
of Net Assets | |
Morgan Stanley Capital I Trust Series 2015-XLF2, Class SNMA
2.109%, 11/15/2026 | | | 11/16/2015 | | | $ | 89,652 | | | $ | 79,891 | | | | 0.03 | % |
PMT Credit Risk Transfer Trust Series 2019-1R, Class A
2.145%, 03/27/2024 | | | 03/21/2019 | | | | 84,673 | | | | 80,697 | | | | 0.03 | % |
Terraform Global Operating LLC
6.125%, 03/01/2026 | | | 02/08/2018 | | | | 14,000 | | | | 14,375 | | | | 0.01 | % |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 1M2
5.398%, 11/25/2025 | | | 09/28/2015 | | | | 73,154 | | | | 71,383 | | | | 0.03 | % |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 2M2
5.648%, 11/25/2025 | | | 09/28/2015 | | | | 20,732 | | | | 20,501 | | | | 0.01 | % |
| (k) | | Inverse interest only security. |
| (l) | | 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
CLP—Chilean Peso
CNY—Chinese Yuan Renminbi
COP—Colombian Peso
DKK—Danish Krone
EUR—Euro
GBP—Great British Pound
HKD—Hong Kong Dollar
IDR—Indonesian Rupiah
ILS—Israeli Shekel
INR—Indian Rupee
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
MYR—Malaysian Ringgit
NOK—Norwegian Krone
NZD—New Zealand Dollar
PEN—Peruvian Sol
PLN—Polish Zloty
RUB—Russian Ruble
SEK—Swedish Krona
SGD—Singapore Dollar
TRY—Turkish Lira
TWD—New Taiwan Dollar
USD—United States Dollar
ZAR—South African Rand
Glossary:
ADR—American Depositary Receipt
BOBL—Bundesobligationen
CBT—Chicago Board of Trade
CDI—Brazil CETIP Interbank Deposit Rate
CDOR—Canadian Dealer Offered Rate
CDX-CMBX.NA—North American Commercial Mortgage-Backed Index
CLO—Collateralized Loan Obligations
CMBS—Commercial Mortgage-Backed Securities
31
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
CPI—Consumer Price Index
EURIBOR—Euro Interbank Offered Rate
GDR—Global Depositary Receipt
LIBOR—London Interbank Offered Rate
OAT—Obligations Assimilables du Trésor
PJSC—Public Joint Stock Company
REIT—Real Estate Investment Trust
REMICs—Real Estate Mortgage Investment Conduits
TBA—To Be Announced
See notes to financial statements.
32
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $142,674,755) | | $ | 178,117,495 | (a) |
Affiliated issuers (cost $64,788,350) | | | 66,294,210 | |
Cash | | | 2,926 | |
Cash collateral due from broker | | | 623,074 | |
Foreign currencies, at value (cost $165,972) | | | 167,008 | |
Receivable for investment securities sold and foreign currency transactions | | | 1,861,673 | |
Unaffiliated interest and dividends receivable | | | 727,104 | |
Unrealized appreciation on forward currency exchange contracts | | | 722,602 | |
Receivable for variation margin on centrally cleared swaps | | | 737 | |
Affiliated dividends receivable | | | 18 | |
| | | | |
Total assets | | | 248,516,847 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased and foreign currency transactions | | | 2,629,738 | |
Unrealized depreciation on forward currency exchange contracts | | | 1,302,619 | |
Unrealized depreciation on inflation swaps | | | 310,311 | |
Market value on credit default swaps (net premiums received $104,284) | | | 205,973 | |
Advisory fee payable | | | 68,661 | |
Payable for capital stock redeemed | | | 64,380 | |
Distribution fee payable | | | 46,744 | |
Administrative fee payable | | | 20,475 | |
Payable for variation margin on futures | | | 4,587 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 183,889 | |
| | | | |
Total liabilities | | | 4,837,523 | |
| | | | |
NET ASSETS | | $ | 243,679,324 | |
| | | | |
COMPOSITION OF NET ASSETS | |
Capital stock, at par | | $ | 23,255 | |
Additional paid-in capital | | | 201,311,416 | |
Distributable earnings | | | 42,344,653 | |
| | | | |
| | $ | 243,679,324 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 21,252,348 | | | | 2,002,120 | | | $ | 10.61 | |
| | | |
| B | | $ | 222,426,976 | | | | 21,253,018 | | | $ | 10.47 | |
| (a) | | Includes securities on loan with a value of $646,459 (see Note E). |
See notes to financial statements.
33
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $39,067) | | $ | 1,777,202 | |
Affiliated issuers | | | 685,624 | |
Interest (net of foreign taxes withheld of $3,306) | | | 2,020,484 | |
Securities lending income | | | 2,298 | |
| | | | |
| | | 4,485,608 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 1,274,223 | |
Distribution fee—Class B | | | 526,074 | |
Transfer agency—Class A | | | 547 | |
Transfer agency—Class B | | | 5,438 | |
Custody and accounting | | | 177,826 | |
Audit and tax | | | 101,259 | |
Administrative | | | 73,979 | |
Printing | | | 67,896 | |
Legal | | | 32,880 | |
Directors’ fees | | | 19,473 | |
Miscellaneous | | | 26,167 | |
| | | | |
Total expenses | | | 2,305,762 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (505,784 | ) |
| | | | |
Net expenses | | | 1,799,978 | |
| | | | |
Net investment income | | | 2,685,630 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Affiliated Underlying Portfolios | | | (242,354 | ) |
Investment transactions(a) | | | 5,602,505 | |
Forward currency exchange contracts | | | (846,012 | ) |
Futures | | | 1,261,034 | |
Swaps | | | (1,329,291 | ) |
Swaptions written | | | 70,092 | |
Foreign currency transactions | | | (1,525,040 | ) |
Net realized gain distributions from Affiliated Underlying Portfolios | | | 412,213 | |
Net change in unrealized appreciation/depreciation of: | | | | |
Affiliated Underlying Portfolios | | | 4,127,222 | |
Investments(b) | | | 8,449,885 | |
Forward currency exchange contracts | | | 157,549 | |
Futures | | | 173,913 | |
Swaps | | | 398,772 | |
Foreign currency denominated assets and liabilities | | | 21,709 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 16,732,197 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 19,417,827 | |
| | | | |
| (a) | | Net of foreign capital gains taxes of $3,327. |
| (b) | | Net of increase in accrued foreign capital gains taxes of $2,061. |
See notes to financial statements.
34
| | |
|
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 2,685,630 | | | $ | 4,063,721 | |
Net realized gain on investment and foreign currency transactions | | | 2,990,934 | | | | 8,220,863 | |
Net realized gain distributions from Affiliated Underlying Portfolios | | | 412,213 | | | | 303,518 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 13,329,050 | | | | 29,876,573 | |
| | | | | | | | |
Net increase in net assets from operations | | | 19,417,827 | | | | 42,464,675 | |
Distributions to Shareholders | |
Class A | | | (1,115,680 | ) | | | (3,532,547 | ) |
Class B | | | (10,939,126 | ) | | | (32,838,881 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net increase (decrease) | | | (19,101,220 | ) | | | 5,082,781 | |
| | | | | | | | |
Total increase (decrease) | | | (11,738,199 | ) | | | 11,176,028 | |
NET ASSETS | |
Beginning of period | | | 255,417,523 | | | | 244,241,495 | |
| | | | | | | | |
End of period | | $ | 243,679,324 | | | $ | 255,417,523 | |
| | | | | | | | |
See notes to financial statements.
35
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Balanced Wealth Strategy Portfolio (the “Portfolio”) is a series of AB Variable Products Series Fund, Inc. (the “Fund”). The Portfolio’s investment objective is to maximize total return consistent with the determination of AllianceBernstein L.P. (the “Adviser”) 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 as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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, 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
36
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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.
37
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks: | | | | | | | | | | | | | | | | |
Information Technology | | $ | 22,711,010 | | | $ | 248,007 | | | $ | 197 | | | $ | 22,959,214 | |
Health Care | | | 11,661,103 | | | | 224,820 | | | | –0 | – | | | 11,885,923 | |
Communication Services | | | 10,725,846 | | | | 121,123 | | | | –0 | – | | | 10,846,969 | |
Real Estate | | | 6,874,726 | | | | 3,277,517 | | | | –0 | – | | | 10,152,243 | |
Consumer Discretionary | | | 9,459,737 | | | | 437,565 | | | | –0 | – | | | 9,897,302 | |
Financials | | | 8,610,039 | | | | 447,703 | | | | –0 | – | | | 9,057,742 | |
Industrials | | | 7,617,222 | | | | 512,174 | | | | –0 | – | | | 8,129,396 | |
Materials | | | 2,310,652 | | | | 2,114,272 | | | | –0 | – | | | 4,424,924 | |
Consumer Staples | | | 4,105,896 | | | | 305,913 | | | | –0 | – | | | 4,411,809 | |
Energy | | | 1,973,492 | | | | 2,378,574 | | | | –0 | – | | | 4,352,066 | |
Utilities | | | 2,070,031 | | | | 295,342 | | | | –0 | – | | | 2,365,373 | |
Consumer Services | | | 75,106 | | | | –0 | – | | | –0 | – | | | 75,106 | |
Transportation | | | –0 | – | | | 73,744 | | | | –0 | – | | | 73,744 | |
Consumer Durables & Apparel | | | 35,789 | | | | 35,856 | | | | –0 | – | | | 71,645 | |
Software & Services | | | 32,774 | | | | –0 | – | | | –0 | – | | | 32,774 | |
Investment Companies | | | 64,620,975 | | | | –0 | – | | | –0 | – | | | 64,620,975 | |
Governments—Treasuries | | | –0 | – | | | 29,076,965 | | | | –0 | – | | | 29,076,965 | |
Corporates—Investment Grade | | | –0 | – | | | 22,792,366 | | | | –0 | – | | | 22,792,366 | |
Corporates—Non-Investment Grade | | | –0 | – | | | 5,221,377 | | | | –0 | – | | | 5,221,377 | |
Quasi-Sovereigns | | | –0 | – | | | 4,419,286 | | | | –0 | – | | | 4,419,286 | |
Collateralized Mortgage Obligations | | | –0 | – | | | 3,785,675 | | | | –0 | – | | | 3,785,675 | |
Mortgage Pass-Throughs | | | –0 | – | | | 3,765,978 | | | | –0 | – | | | 3,765,978 | |
Commercial Mortgage-Backed Securities | | | –0 | – | | | 2,093,375 | | | | –0 | – | | | 2,093,375 | |
Emerging Markets—Corporate Bonds | | | –0 | – | | | 927,177 | | | | –0 | – | | | 927,177 | |
Collateralized Loan Obligations | | | –0 | – | | | 868,963 | | | | –0 | – | | | 868,963 | |
Governments—Sovereign Bonds | | | –0 | – | | | 717,277 | | | | –0 | – | | | 717,277 | |
Emerging Markets—Sovereigns | | | –0 | – | | | 709,046 | | | | –0 | – | | | 709,046 | |
Covered Bonds | | | –0 | – | | | 546,468 | | | | –0 | – | | | 546,468 | |
Emerging Markets—Treasuries | | | –0 | – | | | 344,860 | | | | –0 | – | | | 344,860 | |
Governments—Sovereign Agencies | | | –0 | – | | | 328,163 | | | | –0 | – | | | 328,163 | |
Asset-Backed Securities | | | –0 | – | | | 101,521 | | | | –0 | – | | | 101,521 | |
Short-Term Investments: | | | | | | | | | | | | | | | | |
Governments—Treasuries | | | –0 | – | | | 3,682,768 | | | | –0 | – | | | 3,682,768 | |
Investment Companies | | | 1,673,235 | | | | –0 | – | | | –0 | – | | | 1,673,235 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 154,557,633 | | | | 89,853,875 | | | | 197 | | | | 244,411,705 | |
Other Financial Instruments(a): | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Futures | | | 17,979 | | | | –0 | – | | | –0 | – | | | 17,979 | (b) |
Forward Currency Exchange Contracts | | | –0 | – | | | 722,602 | | | | –0 | – | | | 722,602 | |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | 162,821 | | | | –0 | – | | | 162,821 | (b) |
Liabilities: | | | | | | | | | | | | | | | | |
Futures | | | (6,420 | ) | | | –0 | – | | | –0 | – | | | (6,420 | )(b) |
Forward Currency Exchange Contracts | | | –0 | – | | | (1,302,619 | ) | | | –0 | – | | | (1,302,619 | ) |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | (42,719 | ) | | | –0 | – | | | (42,719 | )(b) |
38
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Credit Default Swaps | | $ | –0 | – | | $ | (205,973 | ) | | $ | –0 | – | | $ | (205,973 | ) |
Inflation (CPI) Swaps | | | –0 | – | | | (310,311 | ) | | | –0 | – | | | (310,311 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 154,569,192 | | | $ | 88,877,676 | | | $ | 197 | | | $ | 243,447,065 | |
| | | | | | | | | | | | | | | | |
| (a) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
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, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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
39
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 (the “Expense Caps”) to .75% and 1.00% of daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2020, such reimbursements/waivers amounted to $38,509.
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, 2020, the reimbursement for such services amounted to $73,979.
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the Portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of ..10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $1,471.
In connection with the Portfolio’s investments in other AB mutual funds, the Adviser has contractually agreed to waive fees and/or reimburse the expenses payable to the Adviser by the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fees of AB mutual funds, as paid by the Portfolio as an acquired fund fee and expense. These fee waivers and/or expense reimbursements will remain in effect until May 1, 2021. For the year ended December 31, 2020, such waivers and/or reimbursements amounted to $465,768.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Distributions | |
Fund | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Realized
Gain (Loss)
(000) | | | Change in
Unrealized
Appr./(Depr.)
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | | | Realized
Gains
(000) | |
Government Money Market Portfolio | | $ | 1,821 | | | $ | 49,763 | | | $ | 49,911 | | | $ | 0 | | | $ | 0 | | | $ | 1,673 | | | $ | 5 | | | $ | 0 | |
AB Discovery Growth Fund, Inc. | | | 3,307 | | | | 423 | | | | 1,631 | | | | 91 | | | | 883 | | | | 3,073 | | | | 11 | | | | 412 | |
AB Trust—AB Discovery Value Fund | | | 3,319 | | | | 27 | | | | 280 | | | | (41 | ) | | | 126 | | | | 3,151 | | | | 28 | | | | 0 | |
Bernstein Fund, Inc.: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
International Small Cap Portfolio | | | 8,771 | | | | 97 | | | | 1,005 | | | | (131 | ) | | | 678 | | | | 8,410 | | | | 97 | | | | 0 | |
International Strategic Equities Portfolio | | | 28,723 | | | | 15,738 | † | | | 2,592 | | | | (76 | ) | | | 1,124 | | | | 42,917 | | | | 363 | | | | 0 | |
Small Cap Core Portfolio | | | 3,312 | | | | 17 | | | | 590 | | | | (1 | ) | | | 367 | | | | 3,105 | | | | 17 | | | | 0 | |
Sanford C. Bernstein Fund, Inc.: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Emerging Markets Portfolio | | | 4,116 | | | | 75 | | | | 724 | | | | 7 | | | | 491 | | | | 3,965 | | | | 75 | | | | 0 | |
International Portfolio | | | 16,145 | | | | 90 | | | | 16,602 | † | | | (91 | ) | | | 458 | | | | 0 | | | | 90 | | | | 0 | |
40
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Distributions | |
Fund | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Realized
Gain (Loss)
(000) | | | Change in
Unrealized
Appr./(Depr.)
(000) | | | Market Value
12/31/20
(000) | �� | | Dividend
Income
(000) | | | Realized
Gains
(000) | |
Government Money Market Portfolio* | | $ | 258 | | | $ | 3,486 | | | $ | 3,744 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | ** | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | (242 | ) | | $ | 4,127 | | | $ | 66,294 | | | $ | 686 | | | $ | 412 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| † | | Includes $15,376,822 of purchases / sales resulting from the merger of the International Portfolio into the International Strategic Equities Portfolio, which took place on December 4, 2020. |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
| ** | | Amount is less than $500. |
Brokerage commissions paid on investment transactions for the year ended December 31, 2020 amounted to $22,183, of which $76 and $0, respectively, was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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.
41
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 125,763,001 | | | $ | 149,997,092 | |
U.S. government securities | | | 26,557,041 | | | | 32,509,745 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 208,114,864 | |
| | | | |
Gross unrealized appreciation | | $ | 41,705,219 | |
Gross unrealized depreciation | | | (5,562,148 | ) |
| | | | |
Net unrealized appreciation | | $ | 36,143,071 | |
| | | | |
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 cash collateral 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, 2020, 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”.
42
| | |
| |
| | | AB 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 forward currency exchange contracts. 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, 2020, 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. If a put or call option purchased by the Portfolio were permitted to expire without being sold or exercised, its premium would represent a loss to the Portfolio. 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. The Portfolio’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. 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. The Portfolio’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended December 31, 2020, the Portfolio held written swaptions for hedging and non-hedging purposes.
43
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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, 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 for OTC swaps 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 clearinghouse on which the transaction is effected. Such amount is shown as cash collateral 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 centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared 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.
44
| | |
| |
| | | AB 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, 2020, the Portfolio held interest rate swaps for hedging and non-hedging purposes.
Inflation (CPI) Swaps:
Inflation swap agreements are contracts in which one party agrees to pay the cumulative percentage increase in a price index (the Consumer Price Index with respect to CPI swaps) over the term of the swap (with some lag on the inflation index), and the other pays a compounded fixed rate. Inflation swaps may be used to protect the net asset value, or NAV, of a Portfolio against an unexpected change in the rate of inflation measured by an inflation index since the value of these agreements is expected to increase if there are unexpected inflation increases.
During the year ended December 31, 2020, the Portfolio held inflation (CPI) 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 referenced obligations with the same counterparty.
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.
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.
During the year ended December 31, 2020, the Portfolio held credit default swaps for hedging and non-hedging purposes.
45
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 futures | | $ | 17,979 | * | | Receivable/Payable for variation margin on futures | | $ | 6,420 | * |
| | | | |
Interest rate contracts | | Receivable/Payable for variation margin on centrally cleared swaps | | | 162,819 | * | | Receivable/Payable for variation margin on centrally cleared swaps | | | 49,316 | * |
| | | | |
Foreign currency contracts | | Unrealized appreciation on forward currency exchange contracts | | | 722,602 | | | Unrealized depreciation on forward currency exchange contracts | | | 1,302,619 | |
| | | | |
Interest rate contracts | | | | | | | | Unrealized depreciation on inflation swaps | | | 310,311 | |
| | | | |
Credit contracts | | | | | | | | Market value on credit default swaps | | | 205,973 | |
| | | | | | | | | | | | |
Total | | | | $ | 903,400 | | | | | $ | 1,874,639 | |
| | | | | | | | | | | | |
| * | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
| | | | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives
Within Statement of Operations | | 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 | | $ | 1,261,034 | | | $ | 173,913 | |
| | | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | | (846,012 | ) | | | 157,549 | |
| | | |
Interest rate contracts | | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | | | 70,092 | | | | –0 | – |
| | | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (1,188,146 | ) | | | 548,337 | |
46
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives
Within Statement of Operations | | Realized Gain or
(Loss) on
Derivatives | | | Change in Unrealized
Appreciation or
(Depreciation) | |
| | | |
Credit contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | $ | (141,145 | ) | | $ | (149,565 | ) |
| | | | | | | | | | |
Total | | | | $ | (844,177 | ) | | $ | 730,234 | |
| | | | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Futures: | | | | |
Average notional amount of buy contracts | | $ | 14,330,974 | |
Average notional amount of sale contracts | | $ | 7,650,431 | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 23,792,772 | |
Average principal amount of sale contracts | | $ | 63,768,993 | |
Swaptions Written: | | | | |
Average notional amount | | $ | 2,687,583 | (a) |
Inflation Swaps: | | | | |
Average notional amount | | $ | 10,000,000 | |
Centrally Cleared Interest Rate Swaps: | | | | |
Average notional amount | | $ | 8,793,878 | |
Credit Default Swaps: | | | | |
Average notional amount of sale contracts | | $ | 1,356,769 | |
Centrally Cleared Credit Default Swaps: | | | | |
Average notional amount of buy contracts | | $ | 1,731,510 | (b) |
| (a) | | Positions were open for six months during the year. |
| (b) | | Positions were open for less than one month 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 OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets
Subject to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Received* | | | Security Collateral
Received* | | | Net Amount of
Derivative Assets | |
Bank of America, NA | | $ | 1,386 | | | $ | (1,386 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
Barclays Bank PLC | | | 17,449 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 17,449 | |
BNP Paribas SA | | | 65,643 | | | | (65,643 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Citibank, NA/Citigroup Global Markets, Inc | | | 129,032 | | | | (129,032 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Credit Suisse International | | | 26,879 | | | | (24,591 | ) | | | –0 | – | | | –0 | – | | | 2,288 | |
Goldman Sachs Bank USA | | | 73,442 | | | | (73,442 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank, NA | | | 89,789 | | | | (89,789 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley & Co., Inc. | | | 134,456 | | | | (134,456 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Natwest Markets PLC | | | 14,972 | | | | (588 | ) | | | –0 | – | | | –0 | – | | | 14,384 | |
Standard Chartered Bank | | | 71,094 | | | | (5,987 | ) | | | –0 | – | | | –0 | – | | | 65,107 | |
State Street Bank & Trust Co. | | | 98,460 | | | | (98,460 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 722,602 | | | $ | (623,374 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 99,228 | ^ |
| | | | | | | | | | | | | | | | | | | | |
47
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Liabilities
Subject to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Pledged* | | | Security Collateral
Pledged* | | | Net Amount of
Derivative Liabilities | |
Bank of America, NA | | $ | 310,311 | | | $ | (1,386 | ) | | $ | (308,925 | ) | | $ | –0 | – | | $ | –0 | – |
BNP Paribas SA | | | 87,622 | | | | (65,643 | ) | | | –0 | – | | | –0 | – | | | 21,979 | |
Citibank, NA/Citigroup Global Markets, Inc | | | 352,461 | | | | (129,032 | ) | | | –0 | – | | | –0 | – | | | 223,429 | |
Credit Suisse International | | | 24,591 | | | | (24,591 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Deutsche Bank AG | | | 32,512 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 32,512 | |
Goldman Sachs Bank USA/Goldman Sachs International | | | 173,763 | | | | (73,442 | ) | | | –0 | – | | | –0 | – | | | 100,321 | |
JPMorgan Chase Bank, NA | | | 94,643 | | | | (89,789 | ) | | | –0 | – | | | –0 | – | | | 4,854 | |
Morgan Stanley & Co., Inc. | | | 287,078 | | | | (134,456 | ) | | | –0 | – | | | –0 | – | | | 152,622 | |
Natwest Markets PLC | | | 588 | | | | (588 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Standard Chartered Bank | | | 5,987 | | | | (5,987 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 348,283 | | | | (98,460 | ) | | | –0 | – | | | –0 | – | | | 249,823 | |
UBS AG | | | 101,064 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 101,064 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,818,903 | | | $ | (623,374 | ) | | $ | (308,925 | ) | | $ | –0 | – | | $ | 886,604 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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-denominated 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. TBA and Dollar Rolls
The Portfolio may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.
The Portfolio may enter into certain TBA transactions known as 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, 2020, the Portfolio earned drop income of $3,298 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities
48
| | |
| |
| | | AB Variable Products Series Fund |
issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value of
Securities on Loan* | | | Cash Collateral* | | | Market Value of
Non-Cash
Collateral* | | | Income from
Borrowers | | | Government Money Market
Portfolio | |
| | Income
Earned | | | Advisory Fee
Waived | |
| $ | 646,459 | | | $ | –0 | – | | $ | 655,064 | | | $ | 2,055 | | | $ | 243 | | | $ | 36 | |
| * | | As of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 77,220 | | | | 78,265 | | | | | | | $ | 757,635 | | | $ | 848,106 | |
Shares issued in reinvestment of dividends and distributions | | | 114,782 | | | | 367,208 | | | | | | | | 1,115,680 | | | | 3,532,547 | |
Shares redeemed | | | (567,977 | ) | | | (441,090 | ) | | | | | | | (5,567,327 | ) | | | (4,638,019 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (375,975 | ) | | | 4,383 | | | | | | | $ | (3,694,012 | ) | | $ | (257,366 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,282,047 | | | | 1,141,276 | | | | | | | $ | 11,968,828 | | | $ | 12,135,176 | |
Shares issued in reinvestment of dividends | | | 1,140,680 | | | | 3,456,725 | | | | | | | | 10,939,126 | | | | 32,838,881 | |
Shares redeemed | | | (4,048,921 | ) | | | (3,799,936 | ) | | | | | | | (38,315,162 | ) | | | (39,633,910 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (1,626,194 | ) | | | 798,065 | | | | | | | $ | (15,407,208 | ) | | $ | 5,340,147 | |
| | | | | | | | | | | | | | | | | | | | |
49
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
At December 31, 2020, certain shareholders of the Portfolio owned 67% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
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, or NAV, when one of these investment strategies is performing more poorly than others.
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 more difficult to trade 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, and because these investments may be 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 the Portfolio’s returns.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing 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 and accrued interest. 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 Securities 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 and negative perceptions of the junk bond market generally, and may be more difficult to trade or dispose of than other types of securities.
Capitalization Risk—Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Investment in Other Investment Companies Risk—As with other investments, investments in other investment companies are subject to market and selection risk. In addition, Contractholders invested in the Portfolio bear both their proportionate share of expenses in the Portfolio (including management fees) and, indirectly, the expenses of the investment companies in which the Portfolio invests (to the extent these expenses are not waived or reimbursed by the Adviser).
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 on the statement of assets and liabilities.
Real Asset Risk—The Portfolio’s investments in securities linked to real assets involve significant risks, including financial, operating, and competitive risks. Investments in securities linked to real assets expose the Portfolio to adverse macroeconomic conditions, such as a rise in interest rates or a downturn in the economy in which the asset is located. Changes in
50
| | |
| |
| | | AB Variable Products Series Fund |
inflation rates or in the market’s inflation expectations may adversely affect the market value of inflation-sensitive equities. 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 (“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.
Active Trading Risk—The Portfolio expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate is expected to exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Portfolio’s return.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
51
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 5,219,650 | | | $ | 5,933,950 | |
Net long-term capital gains | | | 6,835,156 | | | | 30,437,478 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 12,054,806 | | | $ | 36,371,428 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 2,491,465 | |
Undistributed capital gains | | | 3,784,545 | |
Other losses | | | (40,119 | )(a) |
Unrealized appreciation/(depreciation) | | | 36,131,875 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 42,367,766 | (c) |
| | | | |
| (a) | | As of December 31, 2020, the cumulative deferred loss on straddles was $40,119 |
| (b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), the tax treatment of Treasury inflation-protected securities, the amortization on callable bonds, the tax treatment of swaps, and the tax deferral of losses on wash sales. |
| (c) | | The differences between book-basis and tax-basis components of accumulated earnings/(deficit) is attributable primarily to accrual of foreign capital gains tax. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings 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.
52
| | |
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $10.24 | | | | $10.10 | | | | $11.86 | | | | $10.54 | | | | $10.99 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .13 | | | | .19 | | | | .23 | | | | .17 | | | | .19 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .78 | | | | 1.58 | | | | (.87 | ) | | | 1.48 | | | | .34 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | .00 | (c) | | | .00 | (c) | | | .00 | (c) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .91 | | | | 1.77 | | | | (.64 | ) | | | 1.65 | | | | .53 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.24 | ) | | | (.29 | ) | | | (.23 | ) | | | (.24 | ) | | | (.24 | ) |
Distributions from net realized gain on investment transactions | | | (.30 | ) | | | (1.34 | ) | | | (.89 | ) | | | (.09 | ) | | | (.74 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.54 | ) | | | (1.63 | ) | | | (1.12 | ) | | | (.33 | ) | | | (.98 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.61 | | | | $10.24 | | | | $10.10 | | | | $11.86 | | | | $10.54 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 9.41 | % | | | 18.53 | % | | | (6.17 | )% | | | 15.84 | % | | | 4.69 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $21,252 | | | | $24,347 | | | | $23,967 | | | | $29,328 | | | | $30,132 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)(f)‡ | | | .55 | % | | | .55 | % | | | .66 | % | | | .73 | % | | | .73 | % |
Expenses, before waivers/reimbursements (e)(f)‡ | | | .77 | % | | | .75 | % | | | .75 | % | | | .73 | % | | | .73 | % |
Net investment income (b) | | | 1.38 | % | | | 1.81 | % | | | 2.05 | % | | | 1.51 | % | | | 1.74 | %† |
Portfolio turnover rate** | | | 66 | % | | | 63 | % | | | 150 | % | | | 108 | % | | | 106 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .22 | % | | | .22 | % | | | .11 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 55.
53
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| FINANCIAL HIGHLIGHTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $10.10 | | | | $9.98 | | | | $11.73 | | | | $10.42 | | | | $10.87 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .11 | | | | .16 | | | | .20 | | | | .14 | | | | .16 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .78 | | | | 1.56 | | | | (.86 | ) | | | 1.47 | | | | .33 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | .00 | (c) | | | .00 | (c) | | | .00 | (c) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .89 | | | | 1.72 | | | | (.66 | ) | | | 1.61 | | | | .49 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.22 | ) | | | (.26 | ) | | | (.20 | ) | | | (.21 | ) | | | (.20 | ) |
Distributions from net realized gain on investment transactions | | | (.30 | ) | | | (1.34 | ) | | | (.89 | ) | | | (.09 | ) | | | (.74 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.52 | ) | | | (1.60 | ) | | | (1.09 | ) | | | (.30 | ) | | | (.94 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.47 | | | | $10.10 | | | | $9.98 | | | | $11.73 | | | | $10.42 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 9.25 | % | | | 18.20 | % | | | (6.41 | )% | | | 15.62 | % | | | 4.44 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $222,427 | | | | $231,071 | | | | $220,274 | | | | $274,070 | | | | $272,733 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)(f)‡ | | | .80 | % | | | .80 | % | | | .91 | % | | | .98 | % | | | .98 | % |
Expenses, before waivers/reimbursements (e)(f)‡ | | | 1.02 | % | | | 1.00 | % | | | 1.00 | % | | | .98 | % | | | .98 | % |
Net investment income (b) | | | 1.14 | % | | | 1.57 | % | | | 1.79 | % | | | 1.26 | % | | | 1.49 | %† |
Portfolio turnover rate** | | | 66 | % | | | 63 | % | | | 150 | % | | | 108 | % | | | 106 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .22 | % | | | .22 | % | | | .11 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 55.
54
| | |
| |
| | | AB Variable Products Series Fund |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Amount is less than $.005. |
| (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. |
| (e) | | In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the years ended December 31, 2020, December 31, 2019 and December 31, 2018, such waiver amounted to .20%, .20% and .09%, respectively. |
| (f) | | The expense ratios presented below exclude bank overdraft expense: |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | N/A | | | | .54 | % | | | N/A | | | | N/A | | | | N/A | |
Before waivers/reimbursements | | | N/A | | | | .75 | % | | | N/A | | | | N/A | | | | N/A | |
Class B | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | N/A | | | | .79 | % | | | N/A | | | | N/A | | | | N/A | |
Before waivers/reimbursements | | | N/A | | | | 1.00 | % | | | N/A | | | | N/A | | | | N/A | |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total
Return |
| $.001 | | .01% | | .01% |
| * | | 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, 2017 by .02%. |
| ** | | The Portfolio accounts for dollar roll transactions as purchases and sales. |
See notes to financial statements.
55
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Balanced Wealth Strategy Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Balanced Wealth Strategy Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
56
| | |
| | |
| | |
| |
| 2020 TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 30.76% of dividends paid qualify for the dividends received deduction. The Portfolio designates $6,835,156 of dividends paid as long-term capital gain dividends.
57
| | |
| | |
| BALANCED WEALTH STRATEGY | | |
| |
| PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Daniel J. Loewy(2), Vice President Jess Gaspar(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 (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 Multi-Asset Solutions Team. Messrs. Loewy and Gaspar are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
58
| | |
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| MANAGEMENT OF THE FUND | | AB 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 AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| | | | | | | | |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| INDEPENDENT DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership, and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
Jorge A. Bermudez,## 69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
59
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey,## 77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,## 72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
Jeanette W. Loeb,## 68 (2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
60
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Carol C . McMullen,## 65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody,## 68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
| | | | | | | | |
61
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner,## 81 (2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Company’s Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 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”, as defined in the 1940 Act, due to his position as a Senior Vice President of the Adviser. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
62
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB 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^ 60 | | President and Chief
Executive Officer | | See biography above. |
| | | | |
Daniel J. Loewy 46 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer and Head of Multi-Asset Solutions and Chief Investment Officer for Dynamic Asset Allocation. |
| | | | |
Jess Gaspar 52 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since December 2016. |
| | | | |
Emilie D. Wrapp 65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes 44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo 61 | | Treasurer and Chief
Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke 60 | | Controller | | Vice President of the ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto 56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
63
| | |
| | |
| | |
| |
| BALANCED WEALTH STRATEGY PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
64
| | |
| | | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Balanced Wealth Strategy Portfolio (the “Fund”) at a meeting held by video conference on August 4-5, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the underlying funds advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the
65
| | |
| |
| | | AB Variable Products Series Fund |
Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for 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 Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in 2019. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund in 2018 was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, and the underlying funds advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Fund’s recent unprofitability to the Adviser would be exacerbated without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended May 31, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The Adviser informed the directors that there were no institutional products managed by it that utilize investment strategies similar to those of the Fund.
The directors noted that the Fund 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 uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the expense universe median. After reviewing and discussing the Adviser’s explanation for this, the directors concluded that the Fund’s expense ratio was acceptable.
66
| | |
| BALANCED WEALTH STRATEGY PORTFOLIO |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
67
VPS-BW-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS SERIES FUND, INC.
| + | | DYNAMIC ASSET ALLOCATION PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| DYNAMIC ASSET ALLOCATION | | |
| |
| PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Dynamic Asset Allocation Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to maximize total return consistent with 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 contracts, forwards and swaps 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-indexed securities. The Portfolio may invest in US, non-US 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 (“DAA”) techniques, the Adviser adjusts 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 considers factors such as the relative risks and returns expected of potential investments and the cost of such transactions. The Adviser considers 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-US 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. 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, the Bloomberg Barclays US Treasury Index and its blended benchmark, a 60%/40% blend of the MSCI World Index and the Bloomberg Barclays US Treasury Index, respectively, for the one- and five-year periods ended December 31, 2020, and since the Portfolio’s inception on April 1, 2011.
All share classes of the Portfolio underperformed the primary benchmark as well as the blended benchmark and the Bloomberg Barclays US Treasury Index for the annual period. Throughout most of 2020, the Portfolio maintained a significant underweight to risk assets. The Portfolio
1
| | |
| |
| | | AB Variable Products Series Fund |
started the year with a modest overweight to equities, which was reduced in January, influenced by the sudden surge in COVID-19 cases outside China. The Portfolio further de-risked to a significant equity underweight as economic closures and quarantines became more extreme. It was the largest underweight and the fastest five-day reduction since inception. Due to heightened market volatility and ongoing concerns around the COVID-19 pandemic, the Portfolio maintained a defensive posture through the second and third quarters of 2020.
After establishing an equity overweight in November, the Portfolio modestly added to the equity overweight in December due to an improved risk outlook supported by growth and momentum indicators, as well as an elevated return outlook from improving corporate quality indicators and ongoing stimulus support. In a robust year for equity returns following the rapid recovery off March lows, the underweight equity positioning detracted from performance, relative to the primary benchmark, specifically in the month of April, as equity markets strongly advanced following a meaningful sell-off in February and March.
In fixed income, the Portfolio held an overweight to the US, which detracted from performance. The Portfolio ended the period with an overweight to duration. In currency management, the Portfolio held an overweight to the US dollar, relative to the Portfolio’s strategic allocation for most of the year, but moved to an underweight in the fourth quarter.
During the annual period, the Portfolio utilized derivatives for hedging and investment purposes in the form of futures and currency forwards, which detracted from absolute returns, while credit default swaps and written options added.
MARKET REVIEW AND INVESTMENT STRATEGY
US, international and emerging-market equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
Global fixed-income market returns were positive yet volatile over the annual period. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, setting the stage for a rebound in risk assets following the initial sell-off in March. Government bonds rallied as interest rates were slashed. Risk assets began to rally significantly in November when positive vaccine news extended the credit rally. Developed-market and emerging-market investment-grade corporate bonds and commercial mortgage-backed securities led gains as investors searched for higher yields in a period of falling interest rates. Global developed-market high-yield corporate bonds also had strong returns, particularly in the US. Agency mortgage-backed securities, along with emerging-market local-currency debt and high-yield hard-currency sovereign bonds, had positive returns but trailed global treasuries. The US dollar declined against all major developed-market currencies and was mixed against emerging-market currencies. Brent crude oil prices were volatile and fell about 21% due to an uncertain oil industry outlook. Copper prices advanced more than 25%, and gold rose 24% as a perceived inflation hedge.
2
| | |
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO | | |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The MSCI World Index and the Bloomberg Barclays US Treasury Index are unmanaged and 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 Bloomberg Barclays US Treasury Index represents the performance of US Treasuries within the US 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, including public health crises (including the occurrence of a contagious disease or illness), 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 existing 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 and accrued interest. 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 derivatives positions will be periodically adjusted to reflect the Adviser’s view of market and economic conditions, there will be transaction costs that 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-US) Risk: The Portfolio’s investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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, and because these investments may be 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 difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Leverage Risk: When the Portfolio borrows money or otherwise leverages its portfolio, 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. The Portfolio may create leverage through the use of reverse repurchase agreements, forward commitments, or by borrowing money.
(Disclosures, Risks and Note About Historical Performance continued on next page)
3
| | |
| | |
| DISCLOSURES AND RISKS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Portfolio shares.
Capitalization Risk: Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small- and mid-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 (“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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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.
4
| | |
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARKS | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years | | | Since Inception1 | |
| | | |
| Dynamic Asset Allocation Portfolio Class A | | | 5.02% | | | | 6.02% | | | | 5.20% | |
| | | |
| Dynamic Asset Allocation Portfolio Class B | | | 4.86% | | | | 5.76% | | | | 4.95% | |
| | | |
| Primary Benchmark: MSCI World Index | | | 15.90% | | | | 12.19% | | | | 9.54% | |
| | | |
| Bloomberg Barclays US Treasury Index | | | 8.00% | | | | 3.77% | | | | 3.44% | |
| | | |
Blended Benchmark: 60% MSCI World Index/
40% Bloomberg Barclays US Treasury Index | | | 13.76% | | | | 9.13% | | | | 7.39% | |
1 Inception date: 4/1/2011. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating 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.
GROWTH OF A $10,000 INVESTMENT
4/1/20111 TO 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Dynamic Asset Allocation Portfolio Class A shares (from 4/1/20111 to 12/31/2020) as compared to the performance of the Portfolio’s benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
| 1 | | Inception date: 4/1/2011. |
See Disclosures, Risks and Note About Historical Performance on pages 3-4.
5
| | |
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | | | Total
Expenses Paid
During Period+ | | | Total
Annualized
Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,121.90 | | | $ | 4.27 | | | | 0.80 | % | | $ | 4.32 | | | | 0.81 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.11 | | | $ | 4.06 | | | | 0.80 | % | | $ | 4.12 | | | | 0.81 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,121.70 | | | $ | 5.60 | | | | 1.05 | % | | $ | 5.65 | | | | 1.06 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.86 | | | $ | 5.33 | | | | 1.05 | % | | $ | 5.38 | | | | 1.06 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| + | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
6
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| SECURITY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
U.S. Treasury Bonds & Notes | | $ | 201,593,715 | | | | 36.7 | % |
Vanguard Global ex-U.S. Real Estate ETF | | | 13,759,058 | | | | 2.5 | |
Vanguard Real Estate ETF | | | 13,477,032 | | | | 2.5 | |
Apple, Inc. | | | 9,442,088 | | | | 1.7 | |
Microsoft Corp. | | | 7,489,549 | | | | 1.4 | |
Amazon.com, Inc. | | | 6,263,076 | | | | 1.1 | |
Alphabet, Inc.—Class A & Class C | | | 4,648,771 | | | | 0.8 | |
Nestle SA | | | 3,659,230 | | | | 0.7 | |
Facebook, Inc.—Class A | | | 2,927,456 | | | | 0.5 | |
Roche Holding AG | | | 2,545,365 | | | | 0.5 | |
| | | | | | | | | |
| | | $ | 265,805,340 | | | | 48.4 | % |
PORTFOLIO BREAKDOWN2
December 31, 2020 (unaudited)
| | | | |
| ASSET CLASSES | | ALLOCATION | |
Equities | | | | |
US Large-Cap | | | 24.9 | % |
International Large-Cap | | | 24.2 | |
Emerging Market Equities | | | 5.2 | |
Real Equities | | | 5.0 | |
US Small-Cap | | | 2.8 | |
US Mid-Cap | | | 2.7 | |
| | | | | |
Subtotal | | | 64.8 | |
| | | | | |
Fixed Income | | | | |
U.S. Bonds | | | 32.3 | |
International Bonds | | | 2.9 | |
| | | | | |
Subtotal | | | 35.2 | |
| | | | | |
Total | | | 100.0 | % |
SECURITY TYPE BREAKDOWN3
December 31, 2020 (unaudited)
| | | | | | | | |
| SECURITY TYPE | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Common Stocks | | $ | 307,056,802 | | | | 56.9 | % |
Governments—Treasuries | | | 201,593,715 | | | | 37.3 | |
Investment Companies | | | 27,236,090 | | | | 5.0 | |
Rights | | | 5,200 | | | | 0.0 | |
Short-Term Investments | | | 4,201,162 | | | | 0.8 | |
| | | | | | | | | |
Total Investments | | $ | 540,092,969 | | | | 100.0 | % |
| 2 | | All data are as of December 31, 2020. 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. |
| 3 | | 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 |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–55.9% | | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–9.8% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.3% | | | | | | | | |
Arista Networks, Inc.(a) | | | 235 | | | $ | 68,284 | |
Cisco Systems, Inc. | | | 18,790 | | | | 840,852 | |
F5 Networks, Inc.(a) | | | 280 | | | | 49,263 | |
Juniper Networks, Inc. | | | 1,460 | | | | 32,865 | |
Motorola Solutions, Inc. | | | 725 | | | | 123,294 | |
Nokia Oyj(a) | | | 65,083 | | | | 251,372 | |
Telefonaktiebolaget LM Ericsson–Class B | | | 24,588 | | | | 292,485 | |
| | | | | | | | |
| | | | | | | 1,658,415 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.8% | | | | | | | | |
Amphenol Corp.–Class A | | | 1,310 | | | | 171,309 | |
CDW Corp./DE | | | 632 | | | | 83,291 | |
Corning, Inc. | | | 3,365 | | | | 121,140 | |
FLIR Systems, Inc. | | | 560 | | | | 24,545 | |
Halma PLC | | | 3,559 | | | | 119,192 | |
Hamamatsu Photonics KK | | | 1,600 | | | | 91,542 | |
Hexagon AB–Class B | | | 3,240 | | | | 297,050 | |
Hitachi Ltd. | | | 11,135 | | | | 439,491 | |
IPG Photonics Corp.(a) | | | 173 | | | | 38,716 | |
Keyence Corp. | | | 1,897 | | | | 1,067,094 | |
Keysight Technologies, Inc.(a) | | | 828 | | | | 109,370 | |
Kyocera Corp. | | | 3,732 | | | | 229,064 | |
Murata Manufacturing Co., Ltd. | | | 6,673 | | | | 604,103 | |
Omron Corp. | | | 2,137 | | | | 190,773 | |
Shimadzu Corp. | | | 2,556 | | | | 99,352 | |
TDK Corp. | | | 1,492 | | | | 225,118 | |
TE Connectivity Ltd. | | | 1,460 | | | | 176,762 | |
Venture Corp., Ltd. | | | 3,169 | | | | 46,596 | |
Vontier Corp.(a) | | | 578 | | | | 19,305 | |
Yaskawa Electric Corp. | | | 2,723 | | | | 135,756 | |
Yokogawa Electric Corp. | | | 2,628 | | | | 52,416 | |
Zebra Technologies Corp.–Class A(a) | | | 262 | | | | 100,694 | |
| | | | | | | | |
| | | | | | | 4,442,679 | |
| | | | | | | | |
IT SERVICES–2.0% | |
Accenture PLC–Class A | | | 2,825 | | | | 737,918 | |
Adyen NV(a)(b) | | | 87 | | | | 202,148 | |
Afterpay Ltd.(a) | | | 2,459 | | | | 223,537 | |
Akamai Technologies, Inc.(a) | | | 705 | | | | 74,018 | |
Amadeus IT Group SA–Class A | | | 4,486 | | | | 331,144 | |
Atos SE(a) | | | 1,132 | | | | 103,369 | |
Automatic Data Processing, Inc. | | | 1,880 | | | | 331,256 | |
Bechtle AG | | | 272 | | | | 59,280 | |
Broadridge Financial Solutions, Inc. | | | 519 | | | | 79,511 | |
Capgemini SE | | | 1,852 | | | | 288,083 | |
| | | | | | | | |
Cognizant Technology Solutions Corp.–Class A | | | 2,340 | | | | 191,763 | |
Computershare Ltd. | | | 5,603 | | | | 63,051 | |
DXC Technology Co. | | | 1,118 | | | | 28,789 | |
Edenred | | | 2,787 | | | | 158,277 | |
Fidelity National Information Services, Inc. | | | 2,749 | | | | 388,874 | |
Fiserv, Inc.(a) | | | 2,438 | | | | 277,591 | |
FleetCor Technologies, Inc.(a) | | | 361 | | | | 98,492 | |
Fujitsu Ltd. | | | 2,278 | | | | 329,252 | |
Gartner, Inc.(a) | | | 390 | | | | 62,474 | |
Global Payments, Inc. | | | 1,327 | | | | 285,862 | |
International Business Machines Corp. | | | 3,938 | | | | 495,715 | |
Itochu Techno-Solutions Corp. | | | 1,105 | | | | 39,457 | |
Jack Henry & Associates, Inc. | | | 347 | | | | 56,211 | |
Leidos Holdings, Inc. | | | 595 | | | | 62,546 | |
Mastercard, Inc.–Class A | | | 3,910 | | | | 1,395,635 | |
NEC Corp. | | | 2,849 | | | | 153,019 | |
Nexi SpA(a)(b) | | | 4,335 | | | | 86,263 | |
Nomura Research Institute Ltd. | | | 3,684 | | | | 131,790 | |
NTT Data Corp. | | | 7,265 | | | | 99,446 | |
Obic Co., Ltd. | | | 803 | | | | 161,385 | |
Otsuka Corp. | | | 1,200 | | | | 63,296 | |
Paychex, Inc. | | | 1,395 | | | | 129,986 | |
PayPal Holdings, Inc.(a) | | | 5,235 | | | | 1,226,037 | |
SCSK Corp. | | | 600 | | | | 34,311 | |
VeriSign, Inc.(a) | | | 425 | | | | 91,970 | |
Visa, Inc.–Class A | | | 7,550 | | | | 1,651,411 | |
Western Union Co. (The)–Class W | | | 1,790 | | | | 39,273 | |
Wix.com Ltd.(a) | | | 579 | | | | 144,727 | |
Worldline SA/France(a)(b) | | | 2,512 | | | | 244,036 | |
| | | | | | | | |
| | | | | | | 10,621,203 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–2.1% | | | | | | | | |
Advanced Micro Devices, Inc.(a) | | | 5,353 | | | | 490,924 | |
Advantest Corp. | | | 2,363 | | | | 176,993 | |
Analog Devices, Inc. | | | 1,610 | | | | 237,845 | |
Applied Materials, Inc. | | | 4,025 | | | | 347,357 | |
ASM Pacific Technology Ltd. | | | 3,530 | | | | 46,620 | |
ASML Holding NV | | | 4,900 | | | | 2,372,467 | |
Broadcom, Inc. | | | 1,809 | | | | 792,071 | |
Disco Corp. | | | 332 | | | | 111,895 | |
Infineon Technologies AG | | | 14,329 | | | | 547,205 | |
Intel Corp. | | | 18,210 | | | | 907,222 | |
KLA Corp. | | | 710 | | | | 183,826 | |
Lam Research Corp. | | | 679 | | | | 320,671 | |
Lasertec Corp. | | | 869 | | | | 101,997 | |
Maxim Integrated Products, Inc. | | | 1,175 | | | | 104,164 | |
8
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Microchip Technology, Inc. | | | 1,145 | | | $ | 158,136 | |
Micron Technology, Inc.(a) | | | 4,930 | | | | 370,637 | |
NVIDIA Corp. | | | 2,765 | | | | 1,443,883 | |
Qorvo, Inc.(a) | | | 518 | | | | 86,128 | |
QUALCOMM, Inc. | | | 5,014 | | | | 763,833 | |
Renesas Electronics Corp.(a) | | | 8,127 | | | | 85,065 | |
Rohm Co., Ltd. | | | 1,013 | | | | 98,201 | |
Skyworks Solutions, Inc. | | | 724 | | | | 110,685 | |
STMicroelectronics NV | | | 7,342 | | | | 271,623 | |
Teradyne, Inc. | | | 700 | | | | 83,923 | |
Texas Instruments, Inc. | | | 4,095 | | | | 672,112 | |
Tokyo Electron Ltd. | | | 1,720 | | | | 642,528 | |
Xilinx, Inc. | | | 1,085 | | | | 153,820 | |
| | | | | | | | |
| | | | | | | 11,681,831 | |
| | | | | | | | |
SOFTWARE–2.7% | |
Adobe, Inc.(a) | | | 2,130 | | | | 1,065,256 | |
ANSYS, Inc.(a) | | | 412 | | | | 149,886 | |
Autodesk, Inc.(a) | | | 985 | | | | 300,760 | |
AVEVA Group PLC | | | 1,315 | | | | 57,411 | |
Cadence Design Systems, Inc.(a) | | | 1,214 | | | | 165,626 | |
Check Point Software Technologies Ltd.(a)(c) | | | 1,177 | | | | 156,435 | |
Citrix Systems, Inc. | | | 530 | | | | 68,953 | |
CyberArk Software Ltd.(a) | | | 412 | | | | 66,575 | |
Dassault Systemes SE | | | 1,514 | | | | 307,069 | |
Fortinet, Inc.(a) | | | 569 | | | | 84,514 | |
Intuit, Inc. | | | 1,180 | | | | 448,223 | |
Microsoft Corp. | | | 33,673 | | | | 7,489,549 | |
Nice Ltd.(a) | | | 604 | | | | 170,882 | |
NortonLifeLock, Inc. | | | 2,625 | | | | 54,547 | |
Oracle Corp. | | | 8,432 | | | | 545,466 | |
Oracle Corp./Japan | | | 530 | | | | 69,088 | |
Paycom Software, Inc.(a) | | | 234 | | | | 105,826 | |
Sage Group PLC (The) | | | 12,240 | | | | 97,188 | |
salesforce.com, Inc.(a) | | | 4,053 | | | | 901,914 | |
SAP SE | | | 10,861 | | | | 1,406,702 | |
ServiceNow, Inc.(a) | | | 879 | | | | 483,828 | |
Synopsys, Inc.(a) | | | 672 | | | | 174,209 | |
TeamViewer AG(a)(b) | | | 1,497 | | | | 80,415 | |
Temenos AG | | | 397 | | | | 55,314 | |
Trend Micro, Inc./Japan | | | 1,600 | | | | 92,117 | |
Tyler Technologies, Inc.(a) | | | 179 | | | | 78,137 | |
WiseTech Global Ltd. | | | 1,649 | | | | 39,189 | |
Xero Ltd.(a) | | | 1,274 | | | | 144,598 | |
| | | | | | | | |
| | | | | | | 14,859,677 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–1.9% | | | | | | | | |
Apple, Inc. | | | 71,159 | | | | 9,442,088 | |
Canon, Inc. | | | 11,400 | | | | 220,847 | |
FUJIFILM Holdings Corp. | | | 4,200 | | | | 221,558 | |
Hewlett Packard Enterprise Co. | | | 5,730 | | | | 67,900 | |
HP, Inc. | | | 6,070 | | | | 149,261 | |
Logitech International SA | | | 1,893 | | | | 183,801 | |
| | | | | | | | |
NetApp, Inc. | | | 990 | | | | 65,578 | |
Ricoh Co., Ltd. | | | 7,717 | | | | 50,746 | |
Seagate Technology PLC | | | 950 | | | | 59,052 | |
Western Digital Corp. | | | 1,313 | | | | 72,727 | |
Xerox Holdings Corp. | | | 716 | | | | 16,604 | |
| | | | | | | | |
| | | | | | | 10,550,162 | |
| | | | | | | | |
| | | | | | | 53,813,967 | |
| | | | | | | | |
FINANCIALS–7.6% | |
BANKS–3.3% | |
Australia & New Zealand Banking Group Ltd. | | | 32,648 | | | | 572,911 | |
Banco Bilbao Vizcaya Argentaria SA | | | 71,998 | | | | 356,865 | |
Banco Santander SA(a) | | | 180,367 | | | | 562,445 | |
Bank Hapoalim BM(a) | | | 13,064 | | | | 89,727 | |
Bank Leumi Le-Israel BM | | | 16,778 | | | | 99,036 | |
Bank of America Corp. | | | 33,856 | | | | 1,026,175 | |
Bank of Kyoto Ltd. (The) | | | 655 | | | | 34,151 | |
Barclays PLC(a) | | | 179,647 | | | | 360,389 | |
BNP Paribas SA(a) | | | 12,948 | | | | 683,553 | |
CaixaBank SA | | | 39,919 | | | | 102,603 | |
Citigroup, Inc. | | | 9,249 | | | | 570,293 | |
Citizens Financial Group, Inc. | | | 1,879 | | | | 67,193 | |
Comerica, Inc. | | | 600 | | | | 33,516 | |
Commonwealth Bank of Australia | | | 18,413 | | | | 1,170,367 | |
Credit Agricole SA(a) | | | 13,282 | | | | 167,910 | |
Danske Bank A/S(a) | | | 7,538 | | | | 124,584 | |
DBS Group Holdings Ltd. | | | 17,778 | | | | 336,906 | |
DNB ASA(a) | | | 10,914 | | | | 213,867 | |
Erste Group Bank AG(a) | | | 2,832 | | | | 86,270 | |
Fifth Third Bancorp | | | 3,140 | | | | 86,570 | |
First Republic Bank/CA | | | 773 | | | | 113,577 | |
Hang Seng Bank Ltd. | | | 8,803 | | | | 151,923 | |
HSBC Holdings PLC(a) | | | 211,291 | | | | 1,091,369 | |
Huntington Bancshares, Inc./OH | | | 4,495 | | | | 56,772 | |
ING Groep NV(a) | | | 44,857 | | | | 417,073 | |
Intesa Sanpaolo SpA(a) | | | 171,325 | | | | 404,964 | |
Israel Discount Bank Ltd.–Class A | | | 13,191 | | | | 50,931 | |
JPMorgan Chase & Co. | | | 13,555 | | | | 1,722,434 | |
KBC Group NV(a) | | | 2,475 | | | | 173,203 | |
KeyCorp | | | 4,315 | | | | 70,809 | |
Lloyds Banking Group PLC(a) | | | 731,066 | | | | 364,479 | |
M&T Bank Corp. | | | 565 | | | | 71,925 | |
Mediobanca Banca di Credito Finanziario SpA | | | 7,149 | | | | 66,177 | |
Mitsubishi UFJ Financial Group, Inc. | | | 127,145 | | | | 562,949 | |
Mizrahi Tefahot Bank Ltd. | | | 529 | | | | 12,272 | |
Mizuho Financial Group, Inc. | | | 27,768 | | | | 352,436 | |
National Australia Bank Ltd. | | | 36,792 | | | | 641,426 | |
Natwest Group PLC(a) | | | 53,666 | | | | 122,680 | |
Nordea Bank Abp(a) | | | 37,296 | | | | 305,655 | |
9
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Oversea-Chinese Banking Corp., Ltd. | | | 38,061 | | | $ | 290,043 | |
People’s United Financial, Inc. | | | 1,875 | | | | 24,244 | |
PNC Financial Services Group, Inc. (The) | | | 1,880 | | | | 280,120 | |
Raiffeisen Bank International AG(a) | | | 1,704 | | | | 34,628 | |
Regions Financial Corp. | | | 4,265 | | | | 68,752 | |
Resona Holdings, Inc. | | | 24,078 | | | | 84,292 | |
Shinsei Bank Ltd. | | | 1,789 | | | | 22,101 | |
Shizuoka Bank Ltd. (The) | | | 904 | | | | 6,636 | |
Skandinaviska Enskilda Banken AB–Class A(a) | | | 18,734 | | | | 192,913 | |
Societe Generale SA(a) | | | 9,127 | | | | 189,738 | |
Standard Chartered PLC(a) | | | 25,714 | | | | 163,282 | |
Sumitomo Mitsui Financial Group, Inc. | | | 15,017 | | | | 465,499 | |
Sumitomo Mitsui Trust Holdings, Inc. | | | 3,888 | | | | 119,963 | |
SVB Financial Group(a) | | | 236 | | | | 91,528 | |
Svenska Handelsbanken AB–Class A SHS(a) | | | 17,909 | | | | 180,523 | |
Swedbank AB–Class A(a) | | | 1,293 | | | | 22,680 | |
Truist Financial Corp. | | | 5,998 | | | | 287,484 | |
UniCredit SpA(a) | | | 24,423 | | | | 228,829 | |
United Overseas Bank Ltd. | | | 13,541 | | | | 230,798 | |
US Bancorp | | | 6,105 | | | | 284,432 | |
Wells Fargo & Co. | | | 18,408 | | | | 555,553 | |
Westpac Banking Corp. | | | 37,065 | | | | 551,576 | |
Zions Bancorp NA | | | 730 | | | | 31,711 | |
| | | | | | | | |
| | | | | | | 17,905,710 | |
| | | | | | | | |
CAPITAL MARKETS–1.6% | | | | | | | | |
3i Group PLC | | | 10,554 | | | | 166,932 | |
Ameriprise Financial, Inc. | | | 545 | | | | 105,910 | |
Amundi SA(a)(b) | | | 698 | | | | 56,888 | |
ASX Ltd. | | | 2,229 | | | | 123,703 | |
Bank of New York Mellon Corp. (The) | | | 3,615 | | | | 153,421 | |
BlackRock, Inc.–Class A | | | 633 | | | | 456,735 | |
Cboe Global Markets, Inc. | | | 446 | | | | 41,531 | |
Charles Schwab Corp. (The) | | | 6,642 | | | | 352,292 | |
CME Group, Inc.–Class A | | | 1,600 | | | | 291,280 | |
Credit Suisse Group AG | | | 27,544 | | | | 355,617 | |
Daiwa Securities Group, Inc. | | | 16,000 | | | | 72,877 | |
Deutsche Bank AG(a) | | | 22,601 | | | | 248,588 | |
Deutsche Boerse AG | | | 2,188 | | | | 372,556 | |
EQT AB | | | 7,706 | | | | 195,606 | |
Franklin Resources, Inc. | | | 1,190 | | | | 29,738 | |
Goldman Sachs Group, Inc. (The) | | | 1,538 | | | | 405,586 | |
Hargreaves Lansdown PLC | | | 3,794 | | | | 78,999 | |
Hong Kong Exchanges & Clearing Ltd. | | | 13,792 | | | | 756,514 | |
Intercontinental Exchange, Inc. | | | 2,500 | | | | 288,225 | |
Invesco Ltd. | | | 1,630 | | | | 28,411 | |
Japan Exchange Group, Inc. | | | 5,865 | | | | 149,861 | |
| | | | | | | | |
Julius Baer Group Ltd. | | | 2,348 | | | | 135,272 | |
London Stock Exchange Group PLC | | | 3,274 | | | | 404,131 | |
Macquarie Group Ltd. | | | 3,876 | | | | 413,722 | |
Magellan Financial Group Ltd. | | | 946 | | | | 39,182 | |
MarketAxess Holdings, Inc. | | | 160 | | | | 91,290 | |
Moody’s Corp. | | | 745 | | | | 216,229 | |
Morgan Stanley | | | 6,321 | | | | 433,178 | |
MSCI, Inc.–Class A | | | 357 | | | | 159,411 | |
Nasdaq, Inc. | | | 510 | | | | 67,697 | |
Natixis SA(a) | | | 10,888 | | | | 37,308 | |
Nomura Holdings, Inc. | | | 36,193 | | | | 191,355 | |
Northern Trust Corp. | | | 910 | | | | 84,757 | |
Partners Group Holding AG | | | 216 | | | | 253,809 | |
Raymond James Financial, Inc. | | | 509 | | | | 48,696 | |
S&P Global, Inc. | | | 1,100 | | | | 361,603 | |
SBI Holdings, Inc./Japan | | | 2,482 | | | | 59,045 | |
Schroders PLC | | | 1,431 | | | | 65,248 | |
St. James’s Place PLC | | | 6,158 | | | | 95,289 | |
Standard Life Aberdeen PLC | | | 26,804 | | | | 102,740 | |
State Street Corp. | | | 1,565 | | | | 113,901 | |
T. Rowe Price Group, Inc. | | | 975 | | | | 147,605 | |
UBS Group AG | | | 41,887 | | | | 589,762 | |
| | | | | | | | |
| | | | | | | 8,842,500 | |
| | | | | | | | |
CONSUMER FINANCE–0.2% | | | | | | | | |
Acom Co., Ltd. | | | 4,593 | | | | 19,611 | |
American Express Co. | | | 2,900 | | | | 350,639 | |
Capital One Financial Corp. | | | 2,003 | | | | 197,996 | |
Discover Financial Services | | | 1,360 | | | | 123,121 | |
Isracard Ltd. | | | 0 | | | | 1 | |
Synchrony Financial | | | 2,378 | | | | 82,540 | |
| | | | | | | | |
| | | | | | | 773,908 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–0.6% | | | | | | | | |
Berkshire Hathaway, Inc.–Class B(a) | | | 8,684 | | | | 2,013,559 | |
EXOR NV | | | 1,249 | | | | 101,453 | |
Groupe Bruxelles Lambert SA | | | 1,185 | | | | 119,441 | |
IHS Markit Ltd. | | | 1,611 | | | | 144,716 | |
Industrivarden AB–Class C(a) | | | 1,826 | | | | 59,020 | |
Investor AB–Class B | | | 5,243 | | | | 381,603 | |
Kinnevik AB–Class B(a) | | | 2,785 | | | | 139,909 | |
L E Lundbergforetagen AB–Class B(a) | | | 875 | | | | 46,943 | |
M&G PLC | | | 27,397 | | | | 73,949 | |
Mitsubishi UFJ Lease & Finance Co., Ltd. | | | 4,640 | | | | 22,281 | |
ORIX Corp. | | | 15,248 | | | | 234,577 | |
Sofina SA | | | 178 | | | | 60,213 | |
Tokyo Century Corp. | | | 496 | | | | 39,362 | |
Wendel SE | | | 309 | | | | 36,876 | |
| | | | | | | | |
| | | | | | | 3,473,902 | |
| | | | | | | | |
10
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INSURANCE–1.9% | |
Admiral Group PLC | | | 2,197 | | | $ | 86,873 | |
Aegon NV | | | 20,597 | | | | 82,159 | |
Aflac, Inc. | | | 2,890 | | | | 128,518 | |
Ageas SA/NV | | | 2,085 | | | | 110,728 | |
AIA Group Ltd. | | | 132,118 | | | | 1,610,006 | |
Allianz SE | | | 4,336 | | | | 1,065,237 | |
Allstate Corp. (The) | | | 1,350 | | | | 148,406 | |
American International Group, Inc. | | | 3,833 | | | | 145,117 | |
Aon PLC | | | 1,025 | | | | 216,552 | |
Arthur J Gallagher & Co. | | | 852 | | | | 105,401 | |
Assicurazioni Generali SpA | | | 12,649 | | | | 221,464 | |
Assurant, Inc. | | | 260 | | | | 35,417 | |
Aviva PLC | | | 41,214 | | | | 183,321 | |
Chubb Ltd. | | | 2,012 | | | | 309,687 | |
Cincinnati Financial Corp. | | | 660 | | | | 57,664 | |
CNP Assurances(a) | | | 1,975 | | | | 32,088 | |
Dai-ichi Life Holdings, Inc. | | | 12,416 | | | | 187,052 | |
Direct Line Insurance Group PLC | | | 15,828 | | | | 69,227 | |
Everest Re Group Ltd. | | | 194 | | | | 45,413 | |
Gjensidige Forsikring ASA | | | 358 | | | | 7,990 | |
Globe Life, Inc. | | | 402 | | | | 38,174 | |
Hannover Rueck SE | | | 695 | | | | 110,753 | |
Hartford Financial Services Group, Inc. (The) | | | 1,565 | | | | 76,654 | |
Insurance Australia Group Ltd. | | | 26,603 | | | | 96,544 | |
Japan Post Holdings Co., Ltd. | | | 18,130 | | | | 141,217 | |
Legal & General Group PLC | | | 58,066 | | | | 211,617 | |
Lincoln National Corp. | | | 790 | | | | 39,745 | |
Loews Corp. | | | 1,040 | | | | 46,821 | |
Marsh & McLennan Cos., Inc. | | | 2,220 | | | | 259,740 | |
MetLife, Inc. | | | 3,390 | | | | 159,160 | |
MS&AD Insurance Group Holdings, Inc. | | | 5,122 | | | | 155,837 | |
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen | | | 1,425 | | | | 423,405 | |
NN Group NV | | | 3,362 | | | | 145,340 | |
Phoenix Group Holdings PLC | | | 5,766 | | | | 55,256 | |
Poste Italiane SpA(b) | | | 6,014 | | | | 61,516 | |
Principal Financial Group, Inc. | | | 1,090 | | | | 54,075 | |
Progressive Corp. (The) | | | 2,565 | | | | 253,627 | |
Prudential Financial, Inc. | | | 1,755 | | | | 137,013 | |
Prudential PLC | | | 27,057 | | | | 497,523 | |
QBE Insurance Group Ltd. | | | 16,701 | | | | 108,864 | |
RSA Insurance Group PLC | | | 11,875 | | | | 110,068 | |
Sampo Oyj–Class A | | | 5,422 | | | | 231,810 | |
SCOR SE(a) | | | 1,825 | | | | 59,197 | |
Sompo Holdings, Inc. | | | 3,853 | | | | 156,211 | |
Suncorp Group Ltd. | | | 14,515 | | | | 109,232 | |
Swiss Life Holding AG | | | 368 | | | | 171,661 | |
Swiss Re AG | | | 3,392 | | | | 319,571 | |
| | | | | | | | |
T&D Holdings, Inc. | | | 5,646 | | | | 66,786 | |
Tokio Marine Holdings, Inc. | | | 7,416 | | | | 382,084 | |
Travelers Cos., Inc. (The) | | | 1,090 | | | | 153,003 | |
Tryg A/S | | | 1,391 | | | | 43,749 | |
Unum Group | | | 890 | | | | 20,417 | |
Willis Towers Watson PLC | | | 587 | | | | 123,669 | |
WR Berkley Corp. | | | 584 | | | | 38,789 | |
Zurich Insurance Group AG | | | 1,555 | | | | 655,309 | |
| | | | | | | | |
| | | | | | | 10,562,757 | |
| | | | | | | | |
| | | | | | | 41,558,777 | |
| | | | | | | | |
HEALTH CARE–7.4% | | | | | | | | |
BIOTECHNOLOGY–0.8% | | | | | | | | |
AbbVie, Inc. | | | 7,816 | | | | 837,484 | |
Alexion Pharmaceuticals, Inc.(a) | | | 980 | | | | 153,115 | |
Amgen, Inc. | | | 2,578 | | | | 592,734 | |
Argenx SE(a) | | | 467 | | | | 138,064 | |
Biogen, Inc.(a) | | | 665 | | | | 162,832 | |
CSL Ltd. | | | 4,721 | | | | 1,031,503 | |
Genmab A/S(a) | | | 763 | | | | 309,392 | |
Gilead Sciences, Inc. | | | 5,575 | | | | 324,799 | |
Grifols SA | | | 2,899 | | | | 84,641 | |
Incyte Corp.(a) | | | 790 | | | | 68,714 | |
Regeneron Pharmaceuticals, Inc.(a) | | | 502 | | | | 242,521 | |
Vertex Pharmaceuticals, Inc.(a) | | | 1,167 | | | | 275,809 | |
| | | | | | | | |
| | | | | | | 4,221,608 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–1.7% | | | | | | | | |
Abbott Laboratories | | | 7,876 | | | | 862,343 | |
ABIOMED, Inc.(a) | | | 208 | | | | 67,434 | |
Alcon, Inc.(a) | | | 5,660 | | | | 375,802 | |
Align Technology, Inc.(a) | | | 340 | | | | 181,689 | |
Asahi Intecc Co., Ltd. | | | 2,248 | | | | 82,109 | |
Baxter International, Inc. | | | 2,240 | | | | 179,738 | |
Becton Dickinson and Co. | | | 1,288 | | | | 322,283 | |
BioMerieux | | | 477 | | | | 67,135 | |
Boston Scientific Corp.(a) | | | 6,360 | | | | 228,642 | |
Cochlear Ltd. | | | 738 | | | | 107,685 | |
Coloplast A/S–Class B | | | 1,368 | | | | 209,207 | |
Cooper Cos., Inc. (The) | | | 211 | | | | 76,661 | |
Danaher Corp. | | | 2,840 | | | | 630,878 | |
Demant A/S(a) | | | 1,271 | | | | 50,237 | |
DENTSPLY SIRONA, Inc. | | | 946 | | | | 49,533 | |
DexCom, Inc.(a) | | | 459 | | | | 169,701 | |
DiaSorin SpA | | | 290 | | | | 60,549 | |
Edwards Lifesciences Corp.(a) | | | 2,770 | | | | 252,707 | |
Fisher & Paykel Healthcare Corp., Ltd. | | | 6,614 | | | | 157,074 | |
GN Store Nord A/S | | | 1,474 | | | | 117,499 | |
Hologic, Inc.(a) | | | 1,120 | | | | 81,570 | |
Hoya Corp. | | | 4,090 | | | | 566,444 | |
IDEXX Laboratories, Inc.(a) | | | 383 | | | | 191,450 | |
Intuitive Surgical, Inc.(a) | | | 555 | | | | 454,045 | |
11
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Koninklijke Philips NV(a) | | | 10,532 | | | $ | 567,333 | |
Medtronic PLC | | | 5,979 | | | | 700,380 | |
Olympus Corp. | | | 13,355 | | | | 292,393 | |
ResMed, Inc. | | | 666 | | | | 141,565 | |
Sartorius AG (Preference Shares) | | | 410 | | | | 172,684 | |
Siemens Healthineers AG(b) | | | 2,811 | | | | 144,658 | |
Smith & Nephew PLC | | | 8,855 | | | | 183,940 | |
Sonova Holding AG(a) | | | 635 | | | | 165,159 | |
STERIS PLC | | | 391 | | | | 74,110 | |
Straumann Holding AG | | | 108 | | | | 126,513 | |
Stryker Corp. | | | 1,465 | | | | 358,984 | |
Sysmex Corp. | | | 1,927 | | | | 231,869 | |
Teleflex, Inc. | | | 211 | | | | 86,841 | |
Terumo Corp. | | | 7,432 | | | | 311,001 | |
Varian Medical Systems, Inc.(a) | | | 395 | | | | 69,129 | |
West Pharmaceutical Services, Inc. | | | 331 | | | | 93,776 | |
Zimmer Biomet Holdings, Inc. | | | 925 | | | | 142,533 | |
| | | | | | | | |
| | | | | | | 9,405,283 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–0.8% | | | | | | | | |
AmerisourceBergen Corp.–Class A | | | 635 | | | | 62,078 | |
Anthem, Inc. | | | 1,110 | | | | 356,410 | |
Cardinal Health, Inc. | | | 1,265 | | | | 67,753 | |
Centene Corp.(a) | | | 2,536 | | | | 152,236 | |
Cigna Corp. | | | 1,611 | | | | 335,378 | |
CVS Health Corp. | | | 5,789 | | | | 395,389 | |
DaVita, Inc.(a) | | | 300 | | | | 35,220 | |
Fresenius Medical Care AG & Co. KGaA | | | 2,453 | | | | 204,549 | |
Fresenius SE & Co. KGaA | | | 4,812 | | | | 222,516 | |
HCA Healthcare, Inc. | | | 1,170 | | | | 192,418 | |
Henry Schein, Inc.(a) | | | 590 | | | | 39,447 | |
Humana, Inc. | | | 585 | | | | 240,008 | |
Laboratory Corp. of America Holdings(a) | | | 425 | | | | 86,509 | |
McKesson Corp. | | | 715 | | | | 124,353 | |
NMC Health PLC(a)(d)(e) | | | 1,143 | | | | –0 | – |
Orpea SA(a) | | | 595 | | | | 78,024 | |
Quest Diagnostics, Inc. | | | 600 | | | | 71,502 | |
Ramsay Health Care Ltd. | | | 2,058 | | | | 98,888 | |
Ryman Healthcare Ltd. | | | 936 | | | | 10,269 | |
Sonic Healthcare Ltd. | | | 5,188 | | | | 128,542 | |
UnitedHealth Group, Inc. | | | 4,255 | | | | 1,492,143 | |
Universal Health Services, Inc.–Class B | | | 350 | | | | 48,125 | |
| | | | | | | | |
| | | | | | | 4,441,757 | |
| | | | | | | | |
HEALTH CARE TECHNOLOGY–0.1% | | | | | | | | |
Cerner Corp. | | | 1,330 | | | | 104,379 | |
M3, Inc. | | | 5,078 | | | | 479,705 | |
| | | | | | | | |
| |
| | | | | | | 584,084 | |
| | | | | | | | |
| |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–0.5% | | | | | | | | |
Agilent Technologies, Inc. | | | 1,345 | | | | 159,369 | |
Bio-Rad Laboratories, Inc.–Class A(a) | | | 96 | | | | 55,962 | |
Eurofins Scientific SE(a) | | | 1,520 | | | | 127,440 | |
Illumina, Inc.(a) | | | 681 | | | | 251,970 | |
IQVIA Holdings, Inc.(a) | | | 846 | | | | 151,578 | |
Lonza Group AG | | | 858 | | | | 552,695 | |
Mettler-Toledo International, Inc.(a) | | | 120 | | | | 136,762 | |
PerkinElmer, Inc. | | | 505 | | | | 72,467 | |
QIAGEN NV(a) | | | 2,703 | | | | 140,175 | |
Sartorius Stedim Biotech | | | 319 | | | | 113,482 | |
Thermo Fisher Scientific, Inc. | | | 1,785 | | | | 831,417 | |
Waters Corp.(a) | | | 295 | | | | 72,989 | |
| | | | | | | | |
| | | | | | | 2,666,306 | |
| | | | | | | | |
PHARMACEUTICALS–3.5% | | | | | | | | |
Astellas Pharma, Inc. | | | 21,431 | | | | 331,832 | |
AstraZeneca PLC | | | 13,871 | | | | 1,383,123 | |
Bayer AG | | | 10,648 | | | | 627,286 | |
Bristol-Myers Squibb Co. | | | 10,015 | | | | 621,230 | |
Catalent, Inc.(a) | | | 691 | | | | 71,912 | |
Chugai Pharmaceutical Co., Ltd. | | | 7,731 | | | | 412,489 | |
Daiichi Sankyo Co., Ltd. | | | 17,685 | | | | 606,068 | |
Eisai Co., Ltd. | | | 2,933 | | | | 209,748 | |
Eli Lilly & Co. | | | 3,523 | | | | 594,823 | |
GlaxoSmithKline PLC | | | 52,178 | | | | 954,751 | |
H Lundbeck A/S | | | 802 | | | | 27,456 | |
Hikma Pharmaceuticals PLC | | | 1,674 | | | | 57,536 | |
Johnson & Johnson | | | 11,695 | | | | 1,840,559 | |
Kyowa Kirin Co., Ltd. | | | 3,108 | | | | 84,873 | |
Merck & Co., Inc. | | | 11,235 | | | | 919,023 | |
Merck KGaA | | | 1,488 | | | | 255,213 | |
Novartis AG | | | 23,227 | | | | 2,187,005 | |
Novo Nordisk A/S–Class B | | | 18,405 | | | | 1,283,917 | |
Ono Pharmaceutical Co., Ltd. | | | 4,257 | | | | 128,284 | |
Orion Oyj–Class B | | | 1,211 | | | | 55,627 | |
Otsuka Holdings Co., Ltd. | | | 4,495 | | | | 192,595 | |
Perrigo Co. PLC | | | 572 | | | | 25,580 | |
Pfizer, Inc. | | | 24,754 | | | | 911,195 | |
Recordati Industria Chimica e Farmaceutica SpA | | | 1,204 | | | | 66,953 | |
Roche Holding AG | | | 7,308 | | | | 2,545,365 | |
Sanofi | | | 11,738 | | | | 1,137,682 | |
Santen Pharmaceutical Co., Ltd. | | | 4,106 | | | | 66,687 | |
Shionogi & Co., Ltd. | | | 3,100 | | | | 169,482 | |
Takeda Pharmaceutical Co., Ltd. | | | 16,396 | | | | 593,361 | |
Teva Pharmaceutical Industries Ltd. (Sponsored ADR)(a) | | | 11,367 | | | | 109,692 | |
UCB SA | | | 1,307 | | | | 135,010 | |
Viatris, Inc.(a) | | | 5,326 | | | | 99,809 | |
Zoetis, Inc. | | | 2,126 | | | | 351,853 | |
| | | | | | | | |
| | | | | | | 19,058,019 | |
| | | | | | | | |
| | | | | | | 40,377,057 | |
| | | | | | | | |
12
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
CONSUMER DISCRETIONARY–7.1% | | | | | | | | |
AUTO COMPONENTS–0.3% | | | | | | | | |
Aisin Seiki Co., Ltd. | | | 1,800 | | | $ | 53,981 | |
Aptiv PLC | | | 1,191 | | | | 155,175 | |
BorgWarner, Inc. | | | 1,070 | | | | 41,345 | |
Bridgestone Corp. | | | 6,162 | | | | 202,088 | |
Cie Generale des Etablissements Michelin SCA–Class B | | | 1,954 | | | | 251,591 | |
Continental AG | | | 1,267 | | | | 188,574 | |
Denso Corp. | | | 4,989 | | | | 296,949 | |
Faurecia SE(a) | | | 874 | | | | 44,781 | |
Koito Manufacturing Co., Ltd. | | | 1,097 | | | | 74,657 | |
NGK Spark Plug Co., Ltd. | | | 1,803 | | | | 30,790 | |
Stanley Electric Co., Ltd. | | | 1,395 | | | | 45,002 | |
Sumitomo Electric Industries Ltd. | | | 8,682 | | | | 115,043 | |
Toyoda Gosei Co., Ltd. | | | 748 | | | | 21,703 | |
Toyota Industries Corp. | | | 1,698 | | | | 134,908 | |
Valeo SA | | | 2,636 | | | | 103,975 | |
| | | | | | | | |
| | | | | | | 1,760,562 | |
| | | | | | | | |
AUTOMOBILES–1.4% | | | | | | | | |
Bayerische Motoren Werke AG | | | 3,812 | | | | 336,434 | |
Daimler AG | | | 9,852 | | | | 698,303 | |
Ferrari NV | | | 1,451 | | | | 336,547 | |
Fiat Chrysler Automobiles NV(a) | | | 12,630 | | | | 228,174 | |
Ford Motor Co. | | | 17,370 | | | | 152,682 | |
General Motors Co. | | | 5,586 | | | | 232,601 | |
Honda Motor Co., Ltd. | | | 18,767 | | | | 529,535 | |
Isuzu Motors Ltd. | | | 6,348 | | | | 60,431 | |
Nissan Motor Co., Ltd.(a) | | | 26,300 | | | | 142,557 | |
Peugeot SA(a) | | | 6,171 | | | | 168,997 | |
Renault SA(a) | | | 2,213 | | | | 96,867 | |
Subaru Corp. | | | 7,083 | | | | 141,723 | |
Suzuki Motor Corp. | | | 4,318 | | | | 200,163 | |
Tesla, Inc.(a) | | | 3,400 | | | | 2,399,278 | |
Toyota Motor Corp. | | | 22,061 | | | | 1,702,449 | |
Volkswagen AG | | | 374 | | | | 77,980 | |
Volkswagen AG (Preference Shares) | | | 2,137 | | | | 399,371 | |
| | | | | | | | |
| | | | | | | 7,904,092 | |
| | | | | | | | |
DISTRIBUTORS–0.0% | | | | | | | | |
Genuine Parts Co. | | | 610 | | | | 61,262 | |
LKQ Corp.(a) | | | 1,214 | | | | 42,781 | |
Pool Corp. | | | 181 | | | | 67,423 | |
| | | | | | | | |
| | | | | | | 171,466 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–0.9% | | | | | | | | |
Accor SA(a) | | | 2,181 | | | | 79,128 | |
Aristocrat Leisure Ltd. | | | 6,615 | | | | 158,833 | |
Carnival Corp. | | | 3,305 | | | | 71,586 | |
Chipotle Mexican Grill, Inc.–Class A(a) | | | 154 | | | | 213,553 | |
| | | | | | | | |
Compass Group PLC | | | 18,425 | | | | 343,651 | |
Crown Resorts Ltd. | | | 4,287 | | | | 31,906 | |
Darden Restaurants, Inc. | | | 570 | | | | 67,898 | |
Domino’s Pizza, Inc. | | | 173 | | | | 66,339 | |
Entain PLC(a) | | | 6,708 | | | | 104,047 | |
Evolution Gaming Group AB(b) | | | 1,464 | | | | 147,183 | |
Flutter Entertainment PLC(a) | | | 1,614 | | | | 328,183 | |
Galaxy Entertainment Group Ltd. | | | 24,949 | | | | 194,216 | |
Genting Singapore Ltd. | | | 69,609 | | | | 44,831 | |
Hilton Worldwide Holdings, Inc. | | | 1,216 | | | | 135,292 | |
InterContinental Hotels Group PLC(a) | | | 1,821 | | | | 118,028 | |
La Francaise des Jeux SAEM(b) | | | 989 | | | | 45,332 | |
Las Vegas Sands Corp. | | | 1,447 | | | | 86,241 | |
Marriott International, Inc./MD–Class A | | | 1,171 | | | | 154,478 | |
McDonald’s Corp. | | | 3,300 | | | | 708,114 | |
Melco Resorts & Entertainment Ltd. (ADR) | | | 2,272 | | | | 42,146 | |
MGM Resorts International | | | 1,790 | | | | 56,403 | |
Norwegian Cruise Line Holdings Ltd.(a) | | | 1,381 | | | | 35,119 | |
Oriental Land Co., Ltd./Japan | | | 2,303 | | | | 380,528 | |
Royal Caribbean Cruises Ltd. | | | 827 | | | | 61,769 | |
Sands China Ltd. | | | 27,932 | | | | 121,990 | |
SJM Holdings Ltd. | | | 22,833 | | | | 25,600 | |
Sodexo SA | | | 221 | | | | 18,691 | |
Starbucks Corp. | | | 5,191 | | | | 555,333 | |
Whitbread PLC(a) | | | 2,096 | | | | 88,780 | |
Wynn Resorts Ltd. | | | 410 | | | | 46,260 | |
Yum! Brands, Inc. | | | 1,315 | | | | 142,756 | |
| | | | | | | | |
| | | | | | | 4,674,214 | |
| | | | | | | | |
HOUSEHOLD DURABLES–0.6% | | | | | | | | |
Barratt Developments PLC(a) | | | 11,070 | | | | 101,203 | |
Berkeley Group Holdings PLC | | | 1,449 | | | | 93,732 | |
DR Horton, Inc. | | | 1,435 | | | | 98,900 | |
Electrolux AB–Class B | | | 2,430 | | | | 56,539 | |
Garmin Ltd. | | | 620 | | | | 74,189 | |
Iida Group Holdings Co., Ltd. | | | 1,694 | | | | 34,250 | |
Leggett & Platt, Inc. | | | 575 | | | | 25,473 | |
Lennar Corp.–Class A | | | 1,200 | | | | 91,476 | |
Mohawk Industries, Inc.(a) | | | 250 | | | | 35,237 | |
Newell Brands, Inc. | | | 1,675 | | | | 35,560 | |
NVR, Inc.(a) | | | 20 | | | | 81,597 | |
Panasonic Corp. | | | 25,416 | | | | 296,280 | |
Persimmon PLC | | | 3,347 | | | | 126,325 | |
PulteGroup, Inc. | | | 1,165 | | | | 50,235 | |
Rinnai Corp. | | | 416 | | | | 48,357 | |
SEB SA | | | 261 | | | | 47,459 | |
Sekisui Chemical Co., Ltd. | | | 4,000 | | | | 75,845 | |
13
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Sekisui House Ltd. | | | 7,155 | | | $ | 145,760 | |
Sharp Corp./Japan | | | 2,451 | | | | 37,242 | |
Sony Corp. | | | 13,242 | | | | 1,334,370 | |
Taylor Wimpey PLC(a) | | | 37,797 | | | | 85,495 | |
Whirlpool Corp. | | | 300 | | | | 54,147 | |
| | | | | | | | |
| | | | | | | 3,029,671 | |
| | | | | | | | |
INTERNET & DIRECT MARKETING RETAIL–1.6% | | | | | | | | |
Amazon.com, Inc.(a) | | | 1,923 | | | | 6,263,076 | |
Booking Holdings, Inc.(a) | | | 207 | | | | 461,045 | |
Delivery Hero SE(a)(b) | | | 1,474 | | | | 230,517 | |
eBay, Inc. | | | 2,915 | | | | 146,479 | |
Etsy, Inc.(a) | | | 539 | | | | 95,893 | |
Expedia Group, Inc. | | | 582 | | | | 77,057 | |
Just Eat Takeaway.com NV(a)(b) | | | 1,397 | | | | 157,516 | |
Mercari, Inc.(a) | | | 976 | | | | 43,265 | |
Ocado Group PLC(a) | | | 5,101 | | | | 159,509 | |
Prosus NV(a) | | | 5,634 | | | | 608,352 | |
Rakuten, Inc. | | | 9,908 | | | | 95,343 | |
Zalando SE(a)(b) | | | 1,747 | | | | 194,321 | |
ZOZO, Inc. | | | 1,255 | | | | 30,916 | |
| | | | | | | | |
| | | | | | | 8,563,289 | |
| | | | | | | | |
LEISURE PRODUCTS–0.1% | | | | | | | | |
Bandai Namco Holdings, Inc. | | | 2,300 | | | | 199,182 | |
Hasbro, Inc. | | | 550 | | | | 51,447 | |
Sega Sammy Holdings, Inc. | | | 1,992 | | | | 31,445 | |
Shimano, Inc. | | | 854 | | | | 199,903 | |
Yamaha Corp. | | | 1,600 | | | | 94,279 | |
| | | | | | | | |
| | | | | | | 576,256 | |
| | | | | | | | |
MULTILINE RETAIL–0.3% | | | | | | | | |
Dollar General Corp. | | | 1,110 | | | | 233,433 | |
Dollar Tree, Inc.(a) | | | 1,038 | | | | 112,146 | |
Next PLC(a) | | | 1,531 | | | | 147,628 | |
Pan Pacific International Holdings Corp. | | | 4,742 | | | | 109,558 | |
Ryohin Keikaku Co., Ltd. | | | 2,570 | | | | 52,594 | |
Target Corp. | | | 2,215 | | | | 391,014 | |
Wesfarmers Ltd. | | | 13,052 | | | | 507,293 | |
| | | | | | | | |
| | | | | | | 1,553,666 | |
| | | | | | | | |
SPECIALTY RETAIL–0.8% | | | | | | | | |
ABC-Mart, Inc. | | | 380 | | | | 21,129 | |
Advance Auto Parts, Inc. | | | 281 | | | | 44,260 | |
AutoZone, Inc.(a) | | | 105 | | | | 124,471 | |
Best Buy Co., Inc. | | | 1,000 | | | | 99,790 | |
CarMax, Inc.(a) | | | 720 | | | | 68,011 | |
Fast Retailing Co., Ltd. | | | 672 | | | | 602,568 | |
Gap, Inc. (The) | | | 905 | | | | 18,272 | |
Hennes & Mauritz AB–Class B(a) | | | 9,038 | | | | 189,726 | |
Home Depot, Inc. (The) | | | 4,820 | | | | 1,280,288 | |
Industria de Diseno Textil SA | | | 11,346 | | | | 360,120 | |
JD Sports Fashion PLC(a) | | | 5,019 | | | | 58,964 | |
Kingfisher PLC(a) | | | 24,290 | | | | 89,755 | |
| | | | | | | | |
L Brands, Inc. | | | 1,025 | | | | 38,120 | |
Lowe’s Cos., Inc. | | | 3,260 | | | | 523,263 | |
Nitori Holdings Co., Ltd. | | | 923 | | | | 193,001 | |
O’Reilly Automotive, Inc.(a) | | | 340 | | | | 153,874 | |
Ross Stores, Inc. | | | 1,550 | | | | 190,356 | |
Shimamura Co., Ltd. | | | 273 | | | | 28,685 | |
Tiffany & Co. | | | 455 | | | | 59,810 | |
TJX Cos., Inc. (The) | | | 5,340 | | | | 364,669 | |
Tractor Supply Co. | | | 515 | | | | 72,399 | |
Ulta Beauty, Inc.(a) | | | 252 | | | | 72,364 | |
| | | | | | | | |
| | | | | | | 4,653,895 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–1.1% | | | | | | | | |
adidas AG(a) | | | 2,192 | | | | 797,460 | |
Burberry Group PLC(a) | | | 4,658 | | | | 113,749 | |
Cie Financiere Richemont SA | | | 6,009 | | | | 542,865 | |
EssilorLuxottica SA | | | 3,274 | | | | 510,202 | |
Hanesbrands, Inc. | | | 1,547 | | | | 22,555 | |
Hermes International | | | 365 | | | | 392,476 | |
Kering SA | | | 873 | | | | 633,565 | |
LVMH Moet Hennessy Louis Vuitton SE | | | 2,889 | | | | 1,808,517 | |
Moncler SpA(a) | | | 2,262 | | | | 139,069 | |
NIKE, Inc.–Class B | | | 5,600 | | | | 792,232 | |
Pandora A/S | | | 1,211 | | | | 135,532 | |
Puma SE(a) | | | 1,036 | | | | 116,578 | |
PVH Corp. | | | 295 | | | | 27,698 | |
Ralph Lauren Corp. | | | 190 | | | | 19,711 | |
Swatch Group AG (The) | | | 110 | | | | 29,903 | |
Tapestry, Inc. | | | 1,230 | | | | 38,228 | |
Under Armour, Inc.–Class A(a) | | | 827 | | | | 14,200 | |
Under Armour, Inc.–Class C(a) | | | 854 | | | | 12,707 | |
VF Corp. | | | 1,400 | | | | 119,574 | |
| | | | | | | | |
| | | | | | | 6,266,821 | |
| | | | | | | | |
| | | | | | | 39,153,932 | |
| | | | | | | | |
INDUSTRIALS–6.7% | | | | | | | | |
AEROSPACE & DEFENSE–0.8% | | | | | | | | |
Airbus SE(a) | | | 6,762 | | | | 742,090 | |
BAE Systems PLC | | | 32,056 | | | | 213,774 | |
Boeing Co. (The) | | | 2,380 | | | | 509,463 | |
Dassault Aviation SA(a) | | | 29 | | | | 31,579 | |
Elbit Systems Ltd. | | | 350 | | | | 46,138 | |
General Dynamics Corp. | | | 1,050 | | | | 156,261 | |
Howmet Aerospace, Inc. | | | 1,716 | | | | 48,975 | |
Huntington Ingalls Industries, Inc. | | | 179 | | | | 30,516 | |
L3Harris Technologies, Inc. | | | 957 | | | | 180,892 | |
Lockheed Martin Corp. | | | 1,110 | | | | 394,028 | |
MTU Aero Engines AG | | | 612 | | | | 159,529 | |
Northrop Grumman Corp. | | | 720 | | | | 219,398 | |
Raytheon Technologies Corp. | | | 6,720 | | | | 480,547 | |
14
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Rolls-Royce Holdings PLC(a) | | | 96,321 | | | $ | 145,775 | |
Safran SA(a) | | | 3,689 | | | | 522,856 | |
Singapore Technologies Engineering Ltd. | | | 17,972 | | | | 52,012 | |
Teledyne Technologies, Inc.(a) | | | 165 | | | | 64,677 | |
Textron, Inc. | | | 1,005 | | | | 48,572 | |
TransDigm Group, Inc.(a) | | | 263 | | | | 162,757 | |
| | | | | | | | |
| | | | | | | 4,209,839 | |
| | | | | | | | |
AIR FREIGHT & LOGISTICS–0.4% | | | | | | | | |
CH Robinson Worldwide, Inc. | | | 565 | | | | 53,037 | |
Deutsche Post AG | | | 11,387 | | | | 564,064 | |
DSV PANALPINA A/S | | | 2,435 | | | | 409,230 | |
Expeditors International of Washington, Inc. | | | 720 | | | | 68,479 | |
FedEx Corp. | | | 1,065 | | | | 276,495 | |
Kuehne & Nagel International AG | | | 622 | | | | 141,143 | |
SG Holdings Co., Ltd. | | | 3,686 | | | | 100,504 | |
United Parcel Service, Inc.–Class B | | | 3,165 | | | | 532,986 | |
Yamato Holdings Co., Ltd. | | | 3,400 | | | | 86,811 | |
| | | | | | | | |
| | | | | | | 2,232,749 | |
| | | | | | | | |
AIRLINES–0.1% | | | | | | | | |
Alaska Air Group, Inc. | | | 543 | | | | 28,236 | |
American Airlines Group, Inc.(c) | | | 2,682 | | | | 42,295 | |
ANA Holdings, Inc.(a) | | | 1,324 | | | | 29,255 | |
Delta Air Lines, Inc. | | | 2,792 | | | | 112,266 | |
Deutsche Lufthansa AG(a) | | | 2,752 | | | | 36,414 | |
Japan Airlines Co., Ltd.(a) | | | 1,304 | | | | 25,147 | |
Qantas Airways Ltd.(a) | | | 8,408 | | | | 31,528 | |
Singapore Airlines Ltd.(a) | | | 14,000 | | | | 45,426 | |
Southwest Airlines Co. | | | 2,605 | | | | 121,419 | |
United Airlines Holdings, Inc.(a) | | | 1,272 | | | | 55,014 | |
| | | | | | | | |
| | | | | | | 527,000 | |
| | | | | | | | |
BUILDING PRODUCTS–0.5% | | | | | | | | |
AGC, Inc. | | | 2,225 | | | | 77,806 | |
Allegion PLC | | | 385 | | | | 44,806 | |
AO Smith Corp. | | | 555 | | | | 30,425 | |
Assa Abloy AB–Class B | | | 11,538 | | | | 285,127 | |
Carrier Global Corp. | | | 4,125 | | | | 155,595 | |
Cie de Saint-Gobain(a) | | | 5,957 | | | | 273,977 | |
Daikin Industries Ltd. | | | 2,868 | | | | 638,036 | |
Fortune Brands Home & Security, Inc. | | | 571 | | | | 48,946 | |
Geberit AG | | | 427 | | | | 267,289 | |
Johnson Controls International PLC | | | 3,192 | | | | 148,715 | |
Kingspan Group PLC(a) | | | 1,771 | | | | 124,187 | |
LIXIL Group Corp. | | | 2,795 | | | | 60,614 | |
Masco Corp. | | | 1,135 | | | | 62,346 | |
| | | | | | | | |
Nibe Industrier AB | | | 3,589 | | | | 117,697 | |
Otis Worldwide Corp. | | | 1,812 | | | | 122,401 | |
TOTO Ltd. | | | 1,651 | | | | 99,371 | |
| | | | | | | | |
| | | | | | | 2,557,338 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–0.2% | | | | | | | | |
Brambles Ltd. | | | 17,764 | | | | 145,705 | |
Cintas Corp. | | | 385 | | | | 136,082 | |
Copart, Inc.(a) | | | 891 | | | | 113,380 | |
Dai Nippon Printing Co., Ltd. | | | 2,799 | | | | 50,347 | |
Rentokil Initial PLC(a) | | | 20,957 | | | | 146,116 | |
Republic Services, Inc.–Class A | | | 900 | | | | 86,670 | |
Rollins, Inc. | | | 981 | | | | 38,328 | |
Secom Co., Ltd. | | | 2,417 | | | | 222,972 | |
Securitas AB–Class B | | | 3,604 | | | | 58,146 | |
Waste Management, Inc. | | | 1,715 | | | | 202,250 | |
| | | | | | | | |
| | | | | | | 1,199,996 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–0.3% | | | | | | | | |
ACS Actividades de Construccion y Servicios SA | | | 3,203 | | | | 106,414 | |
CIMIC Group Ltd.(a) | | | 1,118 | | | | 21,030 | |
Epiroc AB–Class A | | | 7,586 | | | | 137,873 | |
Epiroc AB–Class B | | | 4,489 | | | | 75,782 | |
Ferrovial SA | | | 4,499 | | | | 124,400 | |
HOCHTIEF AG | | | 285 | | | | 27,734 | |
Jacobs Engineering Group, Inc. | | | 565 | | | | 61,562 | |
Kajima Corp. | | | 5,172 | | | | 69,382 | |
Obayashi Corp. | | | 7,474 | | | | 64,535 | |
Quanta Services, Inc. | | | 615 | | | | 44,292 | |
Skanska AB–Class B | | | 3,916 | | | | 99,795 | |
Taisei Corp. | | | 2,197 | | | | 75,793 | |
Vinci SA | | | 5,932 | | | | 590,883 | |
| | | | | | | | |
| | | | | | | 1,499,475 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–0.8% | | | | | | | | |
ABB Ltd. | | | 21,227 | | | | 595,400 | |
AMETEK, Inc. | | | 999 | | | | 120,819 | |
Eaton Corp. PLC | | | 1,764 | | | | 211,927 | |
Emerson Electric Co. | | | 2,640 | | | | 212,177 | |
Legrand SA | | | 3,005 | | | | 268,817 | |
Melrose Industries PLC(a) | | | 52,623 | | | | 128,210 | |
Mitsubishi Electric Corp. | | | 21,000 | | | | 317,387 | |
Nidec Corp. | | | 5,134 | | | | 649,492 | |
Prysmian SpA | | | 2,778 | | | | 98,876 | |
Rockwell Automation, Inc. | | | 530 | | | | 132,929 | |
Schneider Electric SE | | | 6,365 | | | | 919,917 | |
Siemens Energy AG(a) | | | 3,978 | | | | 145,792 | |
Siemens Gamesa Renewable Energy SA | | | 2,744 | | | | 111,424 | |
Vestas Wind Systems A/S | | | 2,290 | | | | 540,965 | |
| | | | | | | | |
| | | | | | | 4,454,132 | |
| | | | | | | | |
15
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–0.7% | | | | | | | | |
3M Co. | | | 2,575 | | | $ | 450,084 | |
CK Hutchison Holdings Ltd. | | | 31,073 | | | | 216,946 | |
DCC PLC | | | 1,133 | | | | 80,174 | |
General Electric Co. | | | 39,079 | | | | 422,053 | |
Honeywell International, Inc. | | | 3,145 | | | | 668,942 | |
Investment AB Latour–Class B | | | 1,704 | | | | 41,276 | |
Jardine Matheson Holdings Ltd. | | | 2,530 | | | | 141,523 | |
Jardine Strategic Holdings Ltd. | | | 2,551 | | | | 63,469 | |
Keppel Corp., Ltd. | | | 16,745 | | | | 68,192 | |
Roper Technologies, Inc. | | | 495 | | | | 213,390 | |
Siemens AG | | | 7,957 | | | | 1,146,177 | |
Smiths Group PLC | | | 4,560 | | | | 93,795 | |
Toshiba Corp. | | | 4,452 | | | | 124,693 | |
| | | | | | | | |
| | | | | | | 3,730,714 | |
| | | | | | | | |
MACHINERY–1.3% | | | | | | | | |
Alfa Laval AB(a) | | | 3,526 | | | | 97,376 | |
Alstom SA(a) | | | 2,630 | | | | 149,802 | |
Amada Co. Ltd. | | | 3,813 | | | | 41,959 | |
Atlas Copco AB–Class A | | | 7,730 | | | | 397,294 | |
Caterpillar, Inc. | | | 2,405 | | | | 437,758 | |
CNH Industrial NV(a) | | | 11,779 | | | | 148,067 | |
Cummins, Inc. | | | 650 | | | | 147,615 | |
Daifuku Co., Ltd. | | | 1,166 | | | | 144,287 | |
Deere & Co. | | | 1,405 | | | | 378,015 | |
Dover Corp. | | | 635 | | | | 80,169 | |
FANUC Corp. | | | 2,232 | | | | 550,967 | |
Flowserve Corp. | | | 560 | | | | 20,636 | |
Fortive Corp. | | | 1,470 | | | | 104,105 | |
GEA Group AG | | | 1,741 | | | | 62,271 | |
Hino Motors Ltd. | | | 3,307 | | | | 28,231 | |
Hitachi Construction Machinery Co., Ltd. | | | 1,238 | | | | 35,201 | |
IDEX Corp. | | | 322 | | | | 64,142 | |
Illinois Tool Works, Inc. | | | 1,265 | | | | 257,908 | |
Ingersoll Rand, Inc.(a) | | | 1,619 | | | | 73,762 | |
KION Group AG | | | 831 | | | | 72,066 | |
Knorr-Bremse AG | | | 557 | | | | 75,994 | |
Komatsu Ltd. | | | 10,076 | | | | 278,080 | |
Kone Oyj–Class B | | | 3,971 | | | | 323,558 | |
Kubota Corp. | | | 11,872 | | | | 259,375 | |
Kurita Water Industries Ltd. | | | 1,200 | | | | 45,870 | |
Makita Corp. | | | 2,579 | | | | 129,355 | |
MINEBEA MITSUMI, Inc. | | | 4,131 | | | | 82,185 | |
MISUMI Group, Inc. | | | 3,268 | | | | 107,280 | |
Mitsubishi Heavy Industries Ltd. | | | 3,689 | | | | 112,979 | |
NSK Ltd. | | | 4,073 | | | | 35,446 | |
PACCAR, Inc. | | | 1,510 | | | | 130,283 | |
Parker-Hannifin Corp. | | | 595 | | | | 162,084 | |
Pentair PLC | | | 730 | | | | 38,756 | |
Sandvik AB(a) | | | 12,995 | | | | 320,503 | |
Schindler Holding AG | | | 427 | | | | 115,477 | |
| | | | | | | | |
Schindler Holding AG (REG) | | | 232 | | | | 62,708 | |
SKF AB–Class B | | | 4,382 | | | | 114,016 | |
SMC Corp. | | | 660 | | | | 403,086 | |
Snap-on, Inc. | | | 220 | | | | 37,651 | |
Spirax-Sarco Engineering PLC | | | 774 | | | | 119,478 | |
Stanley Black & Decker, Inc. | | | 715 | | | | 127,670 | |
Techtronic Industries Co., Ltd. | | | 15,799 | | | | 225,822 | |
Trane Technologies PLC | | | 1,075 | | | | 156,047 | |
Volvo AB–Class B(a) | | | 17,115 | | | | 405,165 | |
Wartsila Oyj Abp | | | 5,108 | | | | 51,123 | |
Westinghouse Air Brake Technologies Corp. | | | 765 | | | | 55,998 | |
Xylem, Inc./NY | | | 785 | | | | 79,905 | |
| | | | | | | | |
| | | | | | | 7,347,525 | |
| | | | | | | | |
MARINE–0.0% | | | | | | | | |
AP Moller–Maersk A/S–Class A | | | 32 | | | | 66,105 | |
AP Moller–Maersk A/S–Class B | | | 37 | | | | 82,334 | |
Nippon Yusen KK | | | 1,761 | | | | 41,086 | |
| | | | | | | | |
| | | | | | | 189,525 | |
| | | | | | | | |
PROFESSIONAL SERVICES–0.5% | | | | | | | | |
Bureau Veritas SA(a) | | | 3,381 | | | | 90,255 | |
Equifax, Inc. | | | 555 | | | | 107,026 | |
Experian PLC | | | 9,447 | | | | 358,879 | |
Intertek Group PLC | | | 1,627 | | | | 125,670 | |
Nielsen Holdings PLC | | | 1,566 | | | | 32,683 | |
Nihon M&A Center, Inc. | | | 1,721 | | | | 115,089 | |
Persol Holdings Co., Ltd. | | | 2,043 | | | | 36,910 | |
Randstad NV(a) | | | 1,372 | | | | 88,813 | |
Recruit Holdings Co., Ltd. | | | 14,642 | | | | 615,007 | |
RELX PLC (London) | | | 20,111 | | | | 492,064 | |
Robert Half International, Inc. | | | 485 | | | | 30,303 | |
SGS SA | | | 70 | | | | 211,006 | |
Teleperformance | | | 676 | | | | 224,419 | |
Verisk Analytics, Inc.–Class A | | | 700 | | | | 145,313 | |
Wolters Kluwer NV | | | 3,143 | | | | 265,166 | |
| | | | | | | | |
| | | | | | | 2,938,603 | |
| | | | | | | | |
ROAD & RAIL–0.5% | | | | | | | | |
Aurizon Holdings Ltd. | | | 22,082 | | | | 66,344 | |
Central Japan Railway Co. | | | 1,660 | | | | 234,730 | |
CSX Corp. | | | 3,380 | | | | 306,735 | |
East Japan Railway Co. | | | 3,481 | | | | 232,236 | |
Hankyu Hanshin Holdings, Inc. | | | 2,635 | | | | 87,646 | |
JB Hunt Transport Services, Inc. | | | 353 | | | | 48,237 | |
Kansas City Southern | | | 420 | | | | 85,735 | |
Keio Corp. | | | 1,200 | | | | 93,102 | |
Kintetsu Group Holdings Co., Ltd. | | | 1,975 | | | | 86,555 | |
16
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MTR Corp., Ltd. | | | 5,081 | | | $ | 28,416 | |
Norfolk Southern Corp. | | | 1,120 | | | | 266,123 | |
Odakyu Electric Railway Co., Ltd. | | | 3,393 | | | | 106,568 | |
Old Dominion Freight Line, Inc. | | | 403 | | | | 78,657 | |
Seibu Holdings, Inc. | | | 2,487 | | | | 24,396 | |
Tobu Railway Co., Ltd. | | | 2,165 | | | | 64,552 | |
Tokyu Corp. | | | 5,754 | | | | 71,493 | |
Union Pacific Corp. | | | 2,990 | | | | 622,578 | |
West Japan Railway Co. | | | 1,872 | | | | 98,018 | |
| | | | | | | | |
| | | | | | | 2,602,121 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–0.5% | | | | | | | | |
Ashtead Group PLC | | | 4,715 | | | | 222,081 | |
Brenntag AG | | | 1,621 | | | | 126,051 | |
Bunzl PLC | | | 3,877 | | | | 129,445 | |
Fastenal Co. | | | 2,530 | | | | 123,540 | |
Ferguson PLC | | | 2,235 | | | | 271,554 | |
ITOCHU Corp. | | | 15,507 | | | | 445,983 | |
Marubeni Corp. | | | 19,005 | | | | 126,619 | |
Mitsubishi Corp. | | | 15,558 | | | | 383,533 | |
Mitsui & Co., Ltd. | | | 19,057 | | | | 349,397 | |
MonotaRO Co., Ltd. | | | 1,315 | | | | 66,787 | |
Sumitomo Corp. | | | 13,465 | | | | 178,451 | |
Toyota Tsusho Corp. | | | 2,502 | | | | 101,247 | |
United Rentals, Inc.(a) | | | 300 | | | | 69,573 | |
WW Grainger, Inc. | | | 230 | | | | 93,918 | |
| | | | | | | | |
| | | | | | | 2,688,179 | |
| | | | | | | | |
TRANSPORTATION INFRASTRUCTURE–0.1% | | | | | | | | |
Aena SME SA(a)(b) | | | 780 | | | | 135,602 | |
Aeroports de Paris(a) | | | 342 | | | | 44,247 | |
Atlantia SpA(a) | | | 5,703 | | | | 102,984 | |
Auckland International Airport Ltd.(a) | | | 13,988 | | | | 76,495 | |
Getlink SE(a) | | | 5,064 | | | | 87,613 | |
Japan Airport Terminal Co., Ltd. | | | 584 | | | | 35,441 | |
Transurban Group | | | 31,483 | | | | 331,762 | |
| | | | | | | | |
| | | | | | | 814,144 | |
| | | | | | | | |
| | | | | | | 36,991,340 | |
| | | | | | | | |
CONSUMER STAPLES–5.0% | | | | | | | | |
BEVERAGES–1.1% | | | | | | | | |
Anheuser-Busch InBev SA/NV | | | 7,925 | | | | 552,901 | |
Asahi Group Holdings Ltd. | | | 4,453 | | | | 183,384 | |
Brown-Forman Corp.–Class B | | | 792 | | | | 62,909 | |
Budweiser Brewing Co. APAC Ltd.(b) | | | 19,818 | | | | 65,465 | |
Carlsberg AS–Class B | | | 1,232 | | | | 197,505 | |
Coca-Cola Amatil Ltd. | | | 5,833 | | | | 58,121 | |
Coca-Cola Bottlers Japan Holdings, Inc. | | | 1,300 | | | | 20,306 | |
| | | | | | | | |
Coca-Cola Co. (The) | | | 17,220 | | | | 944,345 | |
Coca-Cola European Partners PLC | | | 2,134 | | | | 106,337 | |
Coca-Cola HBC AG | | | 2,301 | | | | 74,513 | |
Constellation Brands, Inc.–Class A | | | 770 | | | | 168,669 | |
Davide Campari-Milano NV | | | 8,446 | | | | 96,811 | |
Diageo PLC | | | 24,308 | | | | 961,838 | |
Heineken NV | | | 2,984 | | | | 332,534 | |
Ito En Ltd. | | | 616 | | | | 39,006 | |
Kirin Holdings Co., Ltd. | | | 9,345 | | | | 220,663 | |
Molson Coors Beverage Co.–Class B | | | 800 | | | | 36,152 | |
Monster Beverage Corp.(a) | | | 1,620 | | | | 149,818 | |
PepsiCo, Inc. | | | 6,125 | | | | 908,337 | |
Pernod Ricard SA | | | 2,445 | | | | 469,554 | |
Remy Cointreau SA | | | 260 | | | | 48,531 | |
Suntory Beverage & Food Ltd. | | | 1,601 | | | | 56,706 | |
Treasury Wine Estates Ltd. | | | 150 | | | | 1,085 | |
| | | | | | | | |
| | | | | | | 5,755,490 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–0.8% | |
Aeon Co., Ltd. | | | 7,528 | | | | 246,966 | |
Coles Group Ltd. | | | 15,355 | | | | 214,531 | |
Cosmos Pharmaceutical Corp. | | | 231 | | | | 37,301 | |
Costco Wholesale Corp. | | | 1,965 | | | | 740,373 | |
Etablissements Franz Colruyt NV | | | 638 | | | | 37,778 | |
J Sainsbury PLC | | | 20,378 | | | | 62,636 | |
Jeronimo Martins SGPS SA | | | 2,897 | | | | 48,698 | |
Kobe Bussan Co., Ltd. | | | 1,418 | | | | 43,568 | |
Koninklijke Ahold Delhaize NV | | | 12,671 | | | | 357,466 | |
Kroger Co. (The) | | | 3,420 | | | | 108,619 | |
Lawson, Inc. | | | 600 | | | | 27,922 | |
Seven & i Holdings Co., Ltd. | | | 8,674 | | | | 307,151 | |
Sundrug Co., Ltd. | | | 824 | | | | 32,933 | |
Sysco Corp. | | | 2,225 | | | | 165,229 | |
Tesco PLC | | | 101,866 | | | | 321,465 | |
Tsuruha Holdings, Inc. | | | 426 | | | | 60,579 | |
Walgreens Boots Alliance, Inc. | | | 3,175 | | | | 126,619 | |
Walmart, Inc. | | | 6,163 | | | | 888,396 | |
Wm Morrison Supermarkets PLC | | | 27,684 | | | | 66,987 | |
Woolworths Group Ltd. | | | 14,518 | | | | 440,047 | |
| | | | | | | | |
| | | | | | | 4,335,264 | |
| | | | | | | | |
FOOD PRODUCTS–1.3% | |
a2 Milk Co., Ltd. (The)(a) | | | 6,019 | | | | 52,350 | |
Ajinomoto Co., Inc. | | | 5,373 | | | | 121,751 | |
Archer-Daniels-Midland Co. | | | 2,475 | | | | 124,765 | |
Associated British Foods PLC(a) | | | 3,365 | | | | 103,893 | |
Calbee, Inc. | | | 1,002 | | | | 30,205 | |
Campbell Soup Co. | | | 875 | | | | 42,306 | |
Chocoladefabriken Lindt & Spruengli AG (REG) | | | 2 | | | | 200,882 | |
17
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Conagra Brands, Inc. | | | 2,165 | | | $ | 78,503 | |
Danone SA | | | 7,109 | | | | 467,816 | |
General Mills, Inc. | | | 2,705 | | | | 159,054 | |
Hershey Co. (The) | | | 650 | | | | 99,015 | |
Hormel Foods Corp. | | | 1,250 | | | | 58,263 | |
JM Smucker Co. (The) | | | 495 | | | | 57,222 | |
Kellogg Co. | | | 1,115 | | | | 69,386 | |
Kerry Group PLC–Class A | | | 1,885 | | | | 273,784 | |
Kikkoman Corp. | | | 1,724 | | | | 119,985 | |
Kraft Heinz Co. (The) | | | 2,878 | | | | 99,751 | |
Lamb Weston Holdings, Inc. | | | 640 | | | | 50,394 | |
McCormick & Co., Inc./MD | | | 1,100 | | | | 105,160 | |
MEIJI Holdings Co., Ltd. | | | 1,318 | | | | 92,760 | |
Mondelez International, Inc.–Class A | | | 6,345 | | | | 370,992 | |
Mowi ASA | | | 5,059 | | | | 112,694 | |
Nestle SA | | | 30,955 | | | | 3,659,230 | |
NH Foods Ltd. | | | 933 | | | | 41,093 | |
Nisshin Seifun Group, Inc. | | | 2,277 | | | | 36,272 | |
Nissin Foods Holdings Co., Ltd. | | | 730 | | | | 62,572 | |
Orkla ASA | | | 4,449 | | | | 45,168 | |
Tyson Foods, Inc.–Class A | | | 1,275 | | | | 82,161 | |
WH Group Ltd.(b) | | | 110,196 | | | | 92,405 | |
Wilmar International Ltd. | | | 22,113 | | | | 77,856 | |
Yakult Honsha Co., Ltd. | | | 1,419 | | | | 71,563 | |
Yamazaki Baking Co., Ltd. | | | 1,394 | | | | 23,282 | |
| | | | | | | | |
| | | | | | | 7,082,533 | |
| | | | | | | | |
HOUSEHOLD PRODUCTS–0.7% | |
Church & Dwight Co., Inc. | | | 1,076 | | | | 93,860 | |
Clorox Co. (The) | | | 570 | | | | 115,094 | |
Colgate-Palmolive Co. | | | 3,780 | | | | 323,228 | |
Essity AB–Class B | | | 6,982 | | | | 224,954 | |
Henkel AG & Co. KGaA | | | 638 | | | | 61,478 | |
Henkel AG & Co. KGaA (Preference Shares) | | | 2,051 | | | | 231,259 | |
Kimberly-Clark Corp. | | | 1,505 | | | | 202,919 | |
Lion Corp. | | | 2,582 | | | | 62,548 | |
Procter & Gamble Co. (The) | | | 11,020 | | | | 1,533,323 | |
Reckitt Benckiser Group PLC | | | 7,382 | | | | 658,875 | |
Unicharm Corp. | | | 4,645 | | | | 220,294 | |
| | | | | | | | |
| | | | | | | 3,727,832 | |
| | | | | | | | |
PERSONAL PRODUCTS–0.7% | |
Beiersdorf AG | | | 1,161 | | | | 133,468 | |
Estee Lauder Cos., Inc. (The)–Class A | | | 990 | | | | 263,528 | |
Kao Corp. | | | 5,549 | | | | 428,694 | |
Kobayashi Pharmaceutical Co., Ltd. | | | 262 | | | | 32,023 | |
L’Oreal SA | | | 2,892 | | | | 1,103,448 | |
Shiseido Co., Ltd. | | | 4,614 | | | | 319,401 | |
Unilever PLC | | | 28,969 | | | | 1,747,087 | |
| | | | | | | | |
| | | | | | | 4,027,649 | |
| | | | | | | | |
TOBACCO–0.4% | |
Altria Group, Inc. | | | 8,240 | | | | 337,840 | |
| | | | | | | | |
British American Tobacco PLC | | | 23,860 | | | | 886,086 | |
Imperial Brands PLC | | | 9,340 | | | | 195,903 | |
Japan Tobacco, Inc. | | | 13,853 | | | | 282,423 | |
Philip Morris International, Inc. | | | 6,900 | | | | 571,251 | |
Swedish Match AB | | | 1,957 | | | | 152,295 | |
| | | | | | | | |
| | | | | | | 2,425,798 | |
| | | | | | | | |
| | | | | | | 27,354,566 | |
| | | | | | | | |
COMMUNICATION SERVICES–4.3% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–1.2% | | | | | | | | |
Altice Europe NV–Class A(a) | | | 7,169 | | | | 46,431 | |
AT&T, Inc. | | | 31,727 | | | | 912,469 | |
BT Group PLC(a) | | | 93,654 | | | | 168,807 | |
Cellnex Telecom SA(b) | | | 3,059 | | | | 183,702 | |
CenturyLink, Inc. | | | 4,362 | | | | 42,529 | |
Charter Communications, Inc.–Class A(a) | | | 643 | | | | 425,377 | |
Comcast Corp.–Class A | | | 20,302 | | | | 1,063,825 | |
Deutsche Telekom AG | | | 34,771 | | | | 634,661 | |
Elisa Oyj | | | 1,638 | | | | 89,794 | |
Eurazeo SE(a) | | | 453 | | | | 30,781 | |
HKT Trust & HKT Ltd.–Class SS | | | 43,580 | | | | 56,520 | |
Iliad SA | | | 171 | | | | 35,100 | |
Infrastrutture Wireless Italiane SpA(b) | | | 2,762 | | | | 33,482 | |
Koninklijke KPN NV | | | 41,123 | | | | 124,985 | |
Nippon Telegraph & Telephone Corp. | | | 14,800 | | | | 379,753 | |
Orange SA | | | 22,965 | | | | 273,399 | |
PCCW Ltd. | | | 48,874 | | | | 29,432 | |
Proximus SADP | | | 1,581 | | | | 31,230 | |
Singapore Telecommunications Ltd. | | | 71,734 | | | | 125,258 | |
Spark New Zealand Ltd. | | | 21,146 | | | | 71,626 | |
Swisscom AG | | | 299 | | | | 161,023 | |
Telecom Italia SpA/Milano | | | 96,254 | | | | 44,676 | |
Telecom Italia SpA/Milano (Savings Shares) | | | 69,387 | | | | 36,155 | |
Telefonica Deutschland Holding AG | | | 11,986 | | | | 33,013 | |
Telefonica SA | | | 57,953 | | | | 230,476 | |
Telenor ASA | | | 8,302 | | | | 140,924 | |
Telia Co. AB | | | 29,074 | | | | 120,071 | |
Telstra Corp., Ltd. | | | 47,917 | | | | 110,046 | |
United Internet AG | | | 1,180 | | | | 49,672 | |
Verizon Communications, Inc. | | | 18,405 | | | | 1,081,294 | |
Washington H Soul Pattinson & Co., Ltd. | | | 1,240 | | | | 28,845 | |
| | | | | | | | |
| | | | | | | 6,795,356 | |
| | | | | | | | |
18
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
ENTERTAINMENT–0.8% | |
Activision Blizzard, Inc. | | | 3,415 | | | $ | 317,083 | |
Bollore SA | | | 10,158 | | | | 42,055 | |
Electronic Arts, Inc. | | | 1,265 | | | | 181,654 | |
Konami Holdings Corp. | | | 1,074 | | | | 60,430 | |
Live Nation Entertainment, Inc.(a)(c) | | | 616 | | | | 45,264 | |
Netflix, Inc.(a) | | | 1,992 | | | | 1,077,134 | |
Nexon Co., Ltd. | | | 5,577 | | | | 172,078 | |
Nintendo Co., Ltd. | | | 1,164 | | | | 747,219 | |
Take-Two Interactive Software, Inc.(a) | | | 535 | | | | 111,168 | |
Toho Co., Ltd./Tokyo | | | 832 | | | | 35,093 | |
Ubisoft Entertainment SA(a) | | | 81 | | | | 7,806 | |
Vivendi SA | | | 9,545 | | | | 307,869 | |
Walt Disney Co. (The)(a) | | | 8,059 | | | | 1,460,129 | |
| | | | | | | | |
| | | | | | | 4,564,982 | |
| | | | | | | | |
INTERACTIVE MEDIA & SERVICES–1.5% | | | | | | | | |
Adevinta ASA–Class B(a) | | | 6,032 | | | | 101,398 | |
Alphabet, Inc.–Class A(a) | | | 1,359 | | | | 2,381,838 | |
Alphabet, Inc.–Class C(a) | | | 1,294 | | | | 2,266,933 | |
Auto Trader Group PLC | | | 11,120 | | | | 90,514 | |
Facebook, Inc.–Class A(a) | | | 10,717 | | | | 2,927,456 | |
Kakaku.com, Inc. | | | 1,547 | | | | 42,347 | |
REA Group Ltd. | | | 607 | | | | 69,530 | |
Scout24 AG(b) | | | 181 | | | | 14,790 | |
SEEK Ltd. | | | 3,727 | | | | 81,714 | |
Twitter, Inc.(a) | | | 3,536 | | | | 191,474 | |
Z Holdings Corp. | | | 30,532 | | | | 184,756 | |
| | | | | | | | |
| | | | | | | 8,352,750 | |
| | | | | | | | |
MEDIA–0.2% | |
CyberAgent, Inc. | | | 1,061 | | | | 73,193 | |
Dentsu Group, Inc. | | | 2,490 | | | | 74,107 | |
Discovery, Inc.–Class A(a)(c) | | | 685 | | | | 20,612 | |
Discovery, Inc.–Class C(a) | | | 1,304 | | | | 34,152 | |
DISH Network Corp.–Class A(a) | | | 1,056 | | | | 34,151 | |
Fox Corp.–Class A(c) | | | 1,500 | | | | 43,680 | |
Fox Corp.–Class B(a) | | | 682 | | | | 19,696 | |
Hakuhodo DY Holdings, Inc. | | | 2,490 | | | | 34,214 | |
Informa PLC(a) | | | 14,664 | | | | 109,648 | |
Interpublic Group of Cos., Inc. (The) | | | 1,725 | | | | 40,572 | |
News Corp.–Class A | | | 1,728 | | | | 31,052 | |
News Corp.–Class B | | | 517 | | | | 9,187 | |
Omnicom Group, Inc. | | | 910 | | | | 56,757 | |
Pearson PLC | | | 8,837 | | | | 81,108 | |
Publicis Groupe SA | | | 2,491 | | | | 123,806 | |
SES SA | | | 3,959 | | | | 37,156 | |
ViacomCBS, Inc.–Class B | | | 2,488 | | | | 92,703 | |
WPP PLC | | | 13,761 | | | | 149,114 | |
| | | | | | | | |
| | | | | | | 1,064,908 | |
| | | | | | | | |
WIRELESS TELECOMMUNICATION SERVICES–0.6% | | | | | | | | |
KDDI Corp. | | | 17,149 | | | | 508,472 | |
| | | | | | | | |
Softbank Corp. | | | 30,142 | | | | 378,342 | |
SoftBank Group Corp. | | | 16,303 | | | | 1,265,683 | |
T-Mobile US, Inc.(a) | | | 2,601 | | | | 350,745 | |
Tele2 AB–Class B | | | 5,748 | | | | 76,034 | |
Vodafone Group PLC | | | 278,458 | | | | 457,364 | |
| | | | | | | | |
| | | | | | | 3,036,640 | |
| | | | | | | | |
| | | | | | | 23,814,636 | |
| | | | | | | | |
MATERIALS–3.1% | |
CHEMICALS–1.7% | |
Air Liquide SA | | | 4,936 | | | | 809,242 | |
Air Products & Chemicals, Inc. | | | 1,000 | | | | 273,220 | |
Air Water, Inc. | | | 2,115 | | | | 37,633 | |
Akzo Nobel NV | | | 2,298 | | | | 246,655 | |
Albemarle Corp. | | | 461 | | | | 68,007 | |
Arkema SA | | | 794 | | | | 90,851 | |
Asahi Kasei Corp. | | | 14,441 | | | | 148,022 | |
BASF SE | | | 10,619 | | | | 839,354 | |
Celanese Corp.–Class A | | | 508 | | | | 66,009 | |
CF Industries Holdings, Inc. | | | 950 | | | | 36,774 | |
Chr Hansen Holding A/S(a) | | | 1,215 | | | | 125,536 | |
Corteva, Inc. | | | 3,306 | | | | 128,008 | |
Covestro AG(b) | | | 2,001 | | | | 123,288 | |
Croda International PLC | | | 1,484 | | | | 133,456 | |
Dow, Inc. | | | 3,256 | | | | 180,708 | |
DuPont de Nemours, Inc. | | | 3,266 | | | | 232,245 | |
Eastman Chemical Co. | | | 580 | | | | 58,162 | |
Ecolab, Inc. | | | 1,100 | | | | 237,996 | |
Evonik Industries AG | | | 2,375 | | | | 77,626 | |
FMC Corp. | | | 580 | | | | 66,659 | |
FUCHS PETROLUB SE (Preference Shares) | | | 800 | | | | 45,138 | |
Givaudan SA | | | 107 | | | | 452,698 | |
International Flavors & Fragrances, Inc.(c) | | | 451 | | | | 49,055 | |
Israel Chemicals Ltd. | | | 8,106 | | | | 41,379 | |
Johnson Matthey PLC | | | 2,228 | | | | 73,815 | |
JSR Corp. | | | 2,342 | | | | 65,301 | |
Kansai Paint Co., Ltd. | | | 2,040 | | | | 62,884 | |
Koninklijke DSM NV | | | 1,984 | | | | 341,191 | |
Kuraray Co., Ltd. | | | 3,676 | | | | 39,139 | |
LANXESS AG | | | 957 | | | | 72,780 | |
Linde PLC | | | 2,340 | | | | 616,613 | |
LyondellBasell Industries NV–Class A | | | 1,099 | | | | 100,734 | |
Mitsubishi Chemical Holdings Corp. | | | 14,738 | | | | 89,288 | |
Mitsubishi Gas Chemical Co., Inc. | | | 1,819 | | | | 41,829 | |
Mosaic Co. (The) | | | 1,510 | | | �� | 34,745 | |
Nippon Paint Holdings Co., Ltd. | | | 1,686 | | | | 185,262 | |
Nissan Chemical Corp. | | | 1,429 | | | | 89,605 | |
Nitto Denko Corp. | | | 1,828 | | | | 163,752 | |
Novozymes A/S–Class B | | | 1,608 | | | | 91,592 | |
Orica Ltd. | | | 4,656 | | | | 54,456 | |
PPG Industries, Inc. | | | 1,050 | | | | 151,431 | |
Sherwin-Williams Co. (The) | | | 375 | | | | 275,591 | |
19
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Shin-Etsu Chemical Co., Ltd. | | | 3,716 | | | $ | 652,216 | |
Sika AG | | | 1,633 | | | | 445,145 | |
Solvay SA | | | 853 | | | | 100,598 | |
Symrise AG | | | 1,481 | | | | 196,889 | |
Taiyo Nippon Sanso Corp. | | | 1,745 | | | | 32,460 | |
Teijin Ltd. | | | 2,050 | | | | 38,577 | |
Toray Industries, Inc. | | | 15,963 | | | | 94,683 | |
Tosoh Corp. | | | 2,791 | | | | 43,607 | |
Umicore SA | | | 1,906 | | | | 91,612 | |
Yara International ASA | | | 2,038 | | | | 84,548 | |
| | | | | | | | |
| | | | | | | 8,898,064 | |
| | | | | | | | |
CONSTRUCTION MATERIALS–0.2% | | | | | | | | |
CRH PLC(a) | | | 9,039 | | | | 384,398 | |
HeidelbergCement AG | | | 1,561 | | | | 116,225 | |
James Hardie Industries PLC(a) | | | 5,099 | | | | 151,119 | |
LafargeHolcim Ltd.(a) | | | 6,027 | | | | 330,808 | |
Martin Marietta Materials, Inc. | | | 277 | | | | 78,660 | |
Taiheiyo Cement Corp. | | | 1,304 | | | | 32,664 | |
Vulcan Materials Co. | | | 565 | | | | 83,795 | |
| | | | | | | | |
| | | | | | | 1,177,669 | |
| | | | | | | | |
CONTAINERS & PACKAGING–0.1% | | | | | | | | |
AMCOR PLC | | | 6,943 | | | | 81,719 | |
Avery Dennison Corp. | | | 385 | | | | 59,718 | |
Ball Corp. | | | 1,410 | | | | 131,384 | |
International Paper Co. | | | 1,725 | | | | 85,767 | |
Packaging Corp. of America | | | 425 | | | | 58,612 | |
Sealed Air Corp. | | | 690 | | | | 31,595 | |
Smurfit Kappa Group PLC | | | 1,254 | | | | 58,275 | |
Westrock Co. | | | 1,127 | | | | 49,058 | |
| | | | | | | | |
| | | | | | | 556,128 | |
| | | | | | | | |
METALS & MINING–1.0% | |
Anglo American PLC | | | 12,776 | | | | 421,892 | |
Antofagasta PLC | | | 4,539 | | | | 89,051 | |
BHP Group Ltd. | | | 30,641 | | | | 1,001,181 | |
BHP Group PLC | | | 21,969 | | | | 580,078 | |
BlueScope Steel Ltd. | | | 5,081 | | | | 68,618 | |
Boliden AB | | | 3,148 | | | | 111,683 | |
Evraz PLC | | | 4,265 | | | | 27,257 | |
Fortescue Metals Group Ltd. | | | 19,493 | | | | 352,090 | |
Freeport-McMoRan, Inc. | | | 6,445 | | | | 167,699 | |
Fresnillo PLC | | | 2,322 | | | | 35,865 | |
Glencore PLC(a) | | | 101,307 | | | | 321,730 | |
Hitachi Metals Ltd. | | | 2,468 | | | | 37,523 | |
JFE Holdings, Inc.(a) | | | 5,000 | | | | 48,007 | |
Newcrest Mining Ltd. | | | 9,300 | | | | 185,607 | |
Newmont Corp. | | | 3,531 | | | | 211,472 | |
Nippon Steel Corp.(a) | | | 9,298 | | | | 119,918 | |
Norsk Hydro ASA | | | 14,486 | | | | 67,419 | |
Northern Star Resources Ltd. | | | 8,518 | | | | 83,255 | |
Nucor Corp. | | | 1,310 | | | | 69,679 | |
Rio Tinto Ltd. | | | 4,273 | | | | 375,774 | |
Rio Tinto PLC | | | 11,667 | | | | 878,211 | |
South32 Ltd. | | | 52,892 | | | | 101,085 | |
| | | | | | | | |
Sumitomo Metal Mining Co., Ltd. | | | 2,682 | | | | 119,298 | |
voestalpine AG | | | 1,337 | | | | 47,718 | |
| | | | | | | | |
| | | | | | | 5,522,110 | |
| | | | | | | | |
PAPER & FOREST PRODUCTS–0.1% | |
Mondi PLC | | | 5,565 | | | | 130,398 | |
Stora Enso Oyj–Class R | | | 6,696 | | | | 128,213 | |
Svenska Cellulosa AB SCA–Class B(a) | | | 6,974 | | | | 121,935 | |
UPM-Kymmene Oyj | | | 6,144 | | | | 229,120 | |
| | | | | | | | |
| | | | | | | 609,666 | |
| | | | | | | | |
| | | | | | | 16,763,637 | |
| | | | | | | | |
UTILITIES–1.9% | |
ELECTRIC UTILITIES–1.1% | |
Alliant Energy Corp. | | | 1,088 | | | | 56,065 | |
American Electric Power Co., Inc. | | | 2,185 | | | | 181,945 | |
Chubu Electric Power Co., Inc. | | | 7,416 | | | | 89,496 | |
Chugoku Electric Power Co., Inc. (The) | | | 3,342 | | | | 39,220 | |
CLP Holdings Ltd. | | | 18,903 | | | | 174,789 | |
Duke Energy Corp. | | | 3,242 | | | | 296,838 | |
Edison International | | | 1,685 | | | | 105,852 | |
EDP–Energias de Portugal SA | | | 31,472 | | | | 197,534 | |
Electricite de France SA(a) | | | 7,145 | | | | 113,065 | |
Elia Group SA/NV | | | 356 | | | | 42,492 | |
Endesa SA | | | 2,965 | | | | 81,327 | |
Enel SpA | | | 93,625 | | | | 952,609 | |
Entergy Corp. | | | 875 | | | | 87,360 | |
Evergy, Inc. | | | 985 | | | | 54,677 | |
Eversource Energy | | | 1,510 | | | | 130,630 | |
Exelon Corp. | | | 4,317 | | | | 182,264 | |
FirstEnergy Corp. | | | 2,375 | | | | 72,699 | |
Fortum Oyj | | | 4,947 | | | | 119,520 | |
HK Electric Investments & HK Electric Investments Ltd.–Class SS(b) | | | 30,514 | | | | 30,032 | |
Iberdrola SA | | | 63,300 | | | | 909,639 | |
Kansai Electric Power Co., Inc. (The) | | | 8,006 | | | | 75,721 | |
Kyushu Electric Power Co., Inc. | | | 4,100 | | | | 35,370 | |
Mercury NZ Ltd. | | | 7,840 | | | | 36,896 | |
NextEra Energy, Inc. | | | 8,690 | | | | 670,434 | |
NRG Energy, Inc. | | | 1,060 | | | | 39,803 | |
Orsted AS(b) | | | 1,747 | | | | 357,445 | |
Pinnacle West Capital Corp. | | | 485 | | | | 38,776 | |
Power Assets Holdings Ltd. | | | 15,969 | | | | 86,482 | |
PPL Corp. | | | 3,415 | | | | 96,303 | |
Red Electrica Corp. SA | | | 4,542 | | | | 93,252 | |
Southern Co. (The) | | | 4,660 | | | | 286,264 | |
SSE PLC | | | 11,066 | | | | 226,667 | |
Terna Rete Elettrica Nazionale SpA | | | 2,250 | | | | 17,289 | |
20
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
Tohoku Electric Power Co., Inc. | | | 4,920 | | | $ | 40,606 | |
Verbund AG | | | 759 | | | | 64,482 | |
Xcel Energy, Inc. | | | 2,330 | | | | 155,341 | |
| | | | | | | | |
| | | | | | | 6,239,184 | |
| | | | | | | | |
GAS UTILITIES–0.2% | | | | | | | | |
APA Group | | | 13,346 | | | | 99,301 | |
Atmos Energy Corp. | | | 542 | | | | 51,723 | |
Enagas SA | | | 2,865 | | | | 63,029 | |
Hong Kong & China Gas Co., Ltd. | | | 122,741 | | | | 183,634 | |
Naturgy Energy Group SA | | | 3,396 | | | | 78,971 | |
Osaka Gas Co., Ltd. | | | 4,317 | | | | 88,488 | |
Snam SpA | | | 23,447 | | | | 132,419 | |
Toho Gas Co., Ltd. | | | 851 | | | | 56,379 | |
Tokyo Gas Co., Ltd. | | | 4,329 | | | | 100,195 | |
| | | | | | | | |
| | | | | | | 854,139 | |
| | | | | | | | |
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS–0.1% | | | | | | | | |
AES Corp. (The) | | | 2,925 | | | | 68,738 | |
Meridian Energy Ltd. | | | 14,751 | | | | 79,000 | |
Uniper SE | | | 2,171 | | | | 75,225 | |
| | | | | | | | |
| | | | | | | 222,963 | |
| | | | | | | | |
MULTI-UTILITIES–0.5% | | | | | | | | |
AGL Energy Ltd. | | | 7,355 | | | | 67,889 | |
Ameren Corp. | | | 1,060 | | | | 82,744 | |
CenterPoint Energy, Inc. | | | 2,405 | | | | 52,044 | |
CMS Energy Corp. | | | 1,270 | | | | 77,483 | |
Consolidated Edison, Inc. | | | 1,490 | | | | 107,682 | |
Dominion Energy, Inc. | | | 3,620 | | | | 272,224 | |
DTE Energy Co. | | | 820 | | | | 99,556 | |
E.ON SE | | | 25,844 | | | | 286,177 | |
Engie SA(a) | | | 21,025 | | | | 322,313 | |
National Grid PLC | | | 36,491 | | | | 431,230 | |
NiSource, Inc. | | | 1,705 | | | | 39,113 | |
Public Service Enterprise Group, Inc. | | | 2,245 | | | | 130,884 | |
RWE AG | | | 6,723 | | | | 284,432 | |
Sempra Energy | | | 1,250 | | | | 159,262 | |
United Utilities Group PLC | | | 7,540 | | | | 92,222 | |
Veolia Environnement SA | | | 6,203 | | | | 152,949 | |
WEC Energy Group, Inc. | | | 1,368 | | | | 125,897 | |
| | | | | | | | |
| | | | | | | 2,784,101 | |
| | | | | | | | |
WATER UTILITIES–0.0% | | | | | | | | |
American Water Works Co., Inc. | | | 821 | | | | 125,999 | |
Severn Trent PLC | | | 2,739 | | | | 85,506 | |
| | | | | | | | |
| | | | | | | 211,505 | |
| | | | | | | | |
| | | | | | | 10,311,892 | |
| | | | | | | | |
REAL ESTATE–1.5% | | | | | | | | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS)–1.0% | | | | | | | | |
Alexandria Real Estate Equities, Inc. | | | 532 | | | | 94,813 | |
| | | | | | | | |
American Tower Corp. | | | 1,975 | | | | 443,309 | |
Ascendas Real Estate Investment Trust | | | 36,711 | | | | 82,874 | |
AvalonBay Communities, Inc. | | | 595 | | | | 95,456 | |
Boston Properties, Inc. | | | 600 | | | | 56,718 | |
British Land Co. PLC (The) | | | 9,308 | | | | 62,340 | |
CapitaLand Integrated Commercial Trust | | | 29,724 | | | | 48,611 | |
Covivio | | | 553 | | | | 50,744 | |
Crown Castle International Corp. | | | 1,920 | | | | 305,645 | |
Dexus | | | 12,575 | | | | 91,206 | |
Digital Realty Trust, Inc. | | | 1,228 | | | | 171,318 | |
Duke Realty Corp. | | | 1,628 | | | | 65,071 | |
Equinix, Inc. | | | 430 | | | | 307,097 | |
Equity Residential | | | 1,480 | | | | 87,734 | |
Essex Property Trust, Inc. | | | 278 | | | | 66,003 | |
Extra Space Storage, Inc. | | | 533 | | | | 61,753 | |
Federal Realty Investment Trust | | | 272 | | | | 23,153 | |
Gecina SA | | | 528 | | | | 82,104 | |
Goodman Group | | | 18,942 | | | | 276,884 | |
GPT Group (The) | | | 22,423 | | | | 77,995 | |
Healthpeak Properties, Inc. | | | 2,380 | | | | 71,947 | |
Host Hotels & Resorts, Inc. | | | 3,120 | | | | 45,646 | |
Iron Mountain, Inc.(c) | | | 1,248 | | | | 36,791 | |
Japan Real Estate Investment Corp. | | | 16 | | | | 92,454 | |
Japan Retail Fund Investment Corp. | | | 31 | | | | 56,418 | |
Kimco Realty Corp. | | | 1,910 | | | | 28,669 | |
Klepierre SA | | | 2,231 | | | | 50,318 | |
Land Securities Group PLC | | | 6,238 | | | | 57,614 | |
Link REIT | | | 23,783 | | | | 215,992 | |
Mapletree Commercial Trust | | | 24,747 | | | | 39,891 | |
Mapletree Logistics Trust | | | 30,622 | | | | 46,606 | |
Mid-America Apartment Communities, Inc. | | | 496 | | | | 62,838 | |
Mirvac Group | | | 45,284 | | | | 91,971 | |
Nippon Building Fund, Inc. | | | 15 | | | | 86,995 | |
Nippon Prologis REIT, Inc. | | | 25 | | | | 78,101 | |
Nomura Real Estate Master Fund, Inc. | | | 49 | | | | 70,121 | |
Orix JREIT, Inc. | | | 1 | | | | 1,654 | |
Prologis, Inc. | | | 3,279 | | | | 326,785 | |
Public Storage | | | 700 | | | | 161,651 | |
Realty Income Corp. | | | 1,558 | | | | 96,861 | |
Regency Centers Corp. | | | 683 | | | | 31,138 | |
SBA Communications Corp. | | | 490 | | | | 138,244 | |
Scentre Group | | | 60,304 | | | | 129,532 | |
Segro PLC | | | 12,623 | | | | 163,793 | |
Simon Property Group, Inc. | | | 1,456 | | | | 124,168 | |
SL Green Realty Corp.(c) | | | 276 | | | | 16,444 | |
Stockland | | | 27,447 | | | | 88,615 | |
Suntec Real Estate Investment Trust | | | 22,651 | | | | 25,546 | |
UDR, Inc. | | | 1,278 | | | | 49,114 | |
21
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
United Urban Investment Corp. | | | 35 | | | $ | 43,331 | |
Ventas, Inc. | | | 1,661 | | | | 81,455 | |
Vicinity Centres | | | 35,201 | | | | 43,525 | |
Vornado Realty Trust | | | 685 | | | | 25,578 | |
Welltower, Inc. | | | 1,835 | | | | 118,578 | |
Weyerhaeuser Co. | | | 3,298 | | | | 110,582 | |
| | | | | | | | |
| | | | | | | 5,459,794 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–0.5% | | | | | | | | |
Aeon Mall Co., Ltd. | | | 1,178 | | | | 19,456 | |
Aroundtown SA | | | 1,933 | | | | 14,412 | |
Azrieli Group Ltd. | | | 489 | | | | 31,079 | |
CapitaLand Ltd. | | | 29,564 | | | | 73,356 | |
CBRE Group, Inc.–Class A(a) | | | 1,465 | | | | 91,885 | |
City Developments Ltd. | | | 5,233 | | | | 31,545 | |
CK Asset Holdings Ltd. | | | 29,761 | | | | 152,284 | |
Daito Trust Construction Co., Ltd. | | | 748 | | | | 69,904 | |
Daiwa House Industry Co., Ltd. | | | 6,519 | | | | 193,827 | |
Deutsche Wohnen SE | | | 3,934 | | | | 209,898 | |
Fastighets AB Balder–Class B(a) | | | 121 | | | | 6,318 | |
Hang Lung Properties Ltd. | | | 23,298 | | | | 61,396 | |
Henderson Land Development Co., Ltd. | | | 34,727 | | | | 134,902 | |
Hongkong Land Holdings Ltd. | | | 12,626 | | | | 52,147 | |
Hulic Co., Ltd. | | | 3,490 | | | | 38,391 | |
LEG Immobilien AG | | | 795 | | | | 123,340 | |
Lendlease Corp Ltd. | | | 1,135 | | | | 11,476 | |
Mitsubishi Estate Co., Ltd. | | | 13,612 | | | | 218,783 | |
Mitsui Fudosan Co., Ltd. | | | 10,709 | | | | 224,242 | |
Nomura Real Estate Holdings, Inc. | | | 1,331 | | | | 29,513 | |
Sino Land Co., Ltd. | | | 36,047 | | | | 46,908 | |
Sumitomo Realty & Development Co., Ltd. | | | 3,562 | | | | 109,969 | |
Sun Hung Kai Properties Ltd. | | | 15,000 | | | | 191,835 | |
Swire Pacific Ltd.–Class A | | | 5,731 | | | | 31,569 | |
Swire Properties Ltd. | | | 13,468 | | | | 39,157 | |
Swiss Prime Site AG | | | 875 | | | | 85,778 | |
Tokyu Fudosan Holdings Corp. | | | 7,006 | | | | 37,423 | |
Unibail-Rodamco-Westfield | | | 1,593 | | | | 124,071 | |
UOL Group Ltd. | | | 5,340 | | | | 31,138 | |
Vonovia SE | | | 5,930 | | | | 433,092 | |
Wharf Real Estate Investment Co., Ltd. | | | 19,931 | | | | 103,584 | |
| | | | | | | | |
| | | | | | | 3,022,678 | |
| | | | | | | | |
| | | | | | | 8,482,472 | |
| | | | | | | | |
ENERGY–1.5% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.1% | | | | | | | | |
Baker Hughes Co.–Class A | | | 3,050 | | | | 63,593 | |
| | | | | | | | |
Halliburton Co. | | | 3,900 | | | | 73,710 | |
Schlumberger NV | | | 6,170 | | | | 134,691 | |
TechnipFMC PLC | | | 1,838 | | | | 17,277 | |
| | | | | | | | |
| | | | | | | 289,271 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–1.4% | | | | | | | | |
Ampol Ltd. | | | 2,812 | | | | 61,663 | |
Apache Corp. | | | 1,665 | | | | 23,626 | |
BP PLC | | | 210,663 | | | | 726,944 | |
Cabot Oil & Gas Corp. | | | 1,740 | | | | 28,327 | |
Chevron Corp. | | | 8,531 | | | | 720,443 | |
Concho Resources, Inc. | | | 857 | | | | 50,006 | |
ConocoPhillips | | | 4,730 | | | | 189,153 | |
Devon Energy Corp. | | | 1,680 | | | | 26,561 | |
Diamondback Energy, Inc. | | | 678 | | | | 32,815 | |
ENEOS Holdings, Inc. | | | 35,325 | | | | 126,877 | |
Eni SpA | | | 29,283 | | | | 305,706 | |
EOG Resources, Inc. | | | 2,580 | | | | 128,665 | |
Equinor ASA | | | 11,529 | | | | 194,569 | |
Exxon Mobil Corp. | | | 18,800 | | | | 774,936 | |
Galp Energia SGPS SA | | | 5,770 | | | | 61,141 | |
Hess Corp. | | | 1,190 | | | | 62,820 | |
HollyFrontier Corp. | | | 650 | | | | 16,802 | |
Idemitsu Kosan Co., Ltd. | | | 1,072 | | | | 23,602 | |
Inpex Corp. | | | 11,643 | | | | 62,783 | |
Kinder Morgan, Inc. | | | 8,649 | | | | 118,232 | |
Koninklijke Vopak NV | | | 810 | | | | 42,540 | |
Lundin Energy AB | | | 2,139 | | | | 57,973 | |
Marathon Oil Corp. | | | 3,485 | | | | 23,245 | |
Marathon Petroleum Corp. | | | 2,851 | | | | 117,917 | |
Neste Oyj | | | 4,921 | | | | 357,283 | |
NOV, Inc. | | | 1,725 | | | | 23,684 | |
Occidental Petroleum Corp. | | | 3,686 | | | | 63,805 | |
Oil Search Ltd. | | | 4,787 | | | | 13,719 | |
OMV AG | | | 1,396 | | | | 55,761 | |
ONEOK, Inc. | | | 1,968 | | | | 75,532 | |
Origin Energy Ltd. | | | 20,273 | | | | 74,430 | |
Phillips 66 | | | 1,940 | | | | 135,684 | |
Pioneer Natural Resources Co. | | | 715 | | | | 81,431 | |
Repsol SA | | | 15,165 | | | | 152,774 | |
Royal Dutch Shell PLC–Class A | | | 42,811 | | | | 750,750 | |
Royal Dutch Shell PLC–Class B | | | 38,736 | | | | 656,525 | |
Santos Ltd. | | | 20,382 | | | | 98,704 | |
TOTAL SE | | | 28,454 | | | | 1,228,137 | |
Valero Energy Corp. | | | 1,795 | | | | 101,543 | |
Williams Cos., Inc. (The) | | | 5,378 | | | | 107,829 | |
Woodside Petroleum Ltd. | | | 10,847 | | | | 190,318 | |
| | | | | | | | |
| | | | | | | 8,145,255 | |
| | | | | | | | |
| | | | | | | 8,434,526 | |
| | | | | | | | |
Total Common Stocks
(cost $184,519,301) | | | | | | | 307,056,802 | |
| | | | | | | | |
22
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | |
GOVERNMENTS– TREASURIES–36.7% | | | | | | | | |
UNITED STATES–36.7% | | | | | | | | |
U.S. Treasury Bonds | | | | | | | | |
1.25%, 05/15/2050 | | $ | 730 | | | $ | 662,589 | |
1.375%, 08/15/2050 | | | 1,065 | | | | 997,273 | |
1.625%, 11/15/2050 | | | 1,324 | | | | 1,318,920 | |
2.00%, 02/15/2050 | | | 915 | | | | 994,062 | |
2.25%, 08/15/2046–08/15/2049 | | | 7,073 | | | | 8,080,122 | |
2.375%, 11/15/2049 | | | 1,045 | | | | 1,228,554 | |
2.50%, 02/15/2045–05/15/2046 | | | 598 | | | | 713,485 | |
2.75%, 08/15/2042–08/15/2047 | | | 1,177 | | | | 1,462,098 | |
2.875%, 05/15/2043–05/15/2049 | | | 6,862 | | | | 8,737,724 | |
3.00%, 05/15/2045–02/15/2049 | | | 4,154 | | | | 5,450,304 | |
3.125%, 11/15/2041–02/15/2043 | | | 2,825 | | | | 3,701,730 | |
3.50%, 02/15/2039 | | | 23 | | | | 31,215 | |
3.625%, 08/15/2043 | | | 3,658 | | | | 5,165,782 | |
3.75%, 08/15/2041–11/15/2043 | | | 399 | | | | 570,158 | |
3.875%, 08/15/2040 | | | 280 | | | | 401,188 | |
4.25%, 05/15/2039 | | | 240 | | | | 355,950 | |
4.375%, 11/15/2039–05/15/2041 | | | 1,258 | | | | 1,907,098 | |
4.50%, 08/15/2039 | | | 317 | | | | 484,762 | |
4.75%, 02/15/2037–02/15/2041 | | | 1,127 | | | | 1,738,478 | |
5.25%, 11/15/2028 | | | 690 | | | | 929,344 | |
5.375%, 02/15/2031 | | | 650 | | | | 932,648 | |
5.50%, 08/15/2028 | | | 1,383 | | | | 1,875,694 | |
6.00%, 02/15/2026 | | | 2,846 | | | | 3,652,663 | |
6.125%, 11/15/2027 | | | 732 | | | | 1,004,327 | |
6.25%, 08/15/2023–05/15/2030 | | | 804 | | | | 1,156,354 | |
6.875%, 08/15/2025 | | | 849 | | | | 1,102,771 | |
7.25%, 08/15/2022 | | | 775 | | | | 863,883 | |
7.625%, 02/15/2025 | | | 295 | | | | 383,684 | |
8.00%, 11/15/2021 | | | 791 | | | | 843,702 | |
U.S. Treasury Notes | | | | | | | | |
0.125%, 11/30/2022 | | | 1,419 | | | | 1,418,900 | |
0.25%, 06/30/2025–09/30/2025 | | | 11,518 | | | | 11,479,855 | |
0.375%, 04/30/2025–12/31/2025 | | | 4,640 | | | | 4,651,138 | |
0.50%, 03/31/2025 | | | 175 | | | | 176,586 | |
0.625%, 05/15/2030–08/15/2030 | | | 4,043 | | | | 3,947,067 | |
0.875%, 11/15/2030 | | | 2,024 | | | | 2,017,042 | |
1.25%, 08/31/2024 | | | 1,994 | | | | 2,068,152 | |
1.375%, 08/31/2023 | | | 1,651 | | | | 1,704,657 | |
1.50%, 09/30/2024–02/15/2030 | | | 9,529 | | | | 10,017,607 | |
| | | | | | | | |
1.625%, 08/15/2022–08/15/2029 | | | 15,079 | | | | 15,732,113 | |
1.75%, 03/31/2022–11/15/2029 | | | 15,661 | | | | 16,266,629 | |
1.875%, 11/30/2021–10/31/2022 | | | 6,713 | | | | 6,887,006 | |
2.00%, 11/15/2021–11/15/2026 | | | 23,993 | | | | 25,292,448 | |
2.125%, 11/30/2023–05/15/2025 | | | 13,005 | | | | 13,877,762 | |
2.25%, 04/30/2024–11/15/2027 | | | 8,410 | | | | 9,218,026 | |
2.375%, 08/15/2024–05/15/2029 | | | 4,221 | | | | 4,710,579 | |
2.50%, 08/15/2023–05/15/2024 | | | 5,883 | | | | 6,302,990 | |
2.625%, 02/15/2029 | | | 821 | | | | 942,482 | |
2.75%, 11/15/2023–02/15/2028 | | | 3,400 | | | | 3,670,515 | |
2.875%, 10/31/2023–05/15/2028 | | | 2,273 | | | | 2,505,761 | |
3.125%, 05/15/2021–11/15/2028 | | | 1,655 | | | | 1,959,838 | |
| | | | | | | | |
Total Governments–Treasuries
(cost $185,671,514) | | | | | | | 201,593,715 | |
| | | | | |
| | |
Shares | | | | |
INVESTMENT COMPANIES–5.0% | | | | | | | | |
FUNDS AND INVESTMENT TRUSTS–5.0%(f) | | | | | | | | |
Vanguard Global ex-U.S. Real Estate ETF | | | 253,343 | | | | 13,759,058 | |
Vanguard Real Estate ETF | | | 158,684 | | | | 13,477,032 | |
| | | | | | | | |
Total Investment Companies
(cost $25,954,766) | | | | | | | 27,236,090 | |
| | | | | |
RIGHTS–0.0% | |
ENERGY–0.0% | |
Repsol SA, expiring 01/08/2021(a)
(cost $5,322) | | | 15,165 | | | | 5,200 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–0.8% | | | | | | | | |
INVESTMENT COMPANIES–0.8% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 0.03%(f)(g)(h)
(cost $4,201,162) | | | 4,201,162 | | | | 4,201,162 | |
| | | | | | | | |
TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL FOR SECURITIES LOANED–98.4%
(cost $400,352,065) | | | | | | | 540,092,969 | |
| | | | | |
23
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–0.0% | | | | | | | | |
INVESTMENT COMPANIES–0.0% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio Class AB, 0.03%(f)(g)(h)
(cost $66,750) | | | 66,750 | | | $ | 66,750 | |
| | | | | | | | |
TOTAL INVESTMENTS–98.4%
(cost $400,418,815) | | | | | | $ | 540,159,719 | |
Other assets less liabilities–1.6% | | | | | | | 8,626,354 | |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 548,786,073 | |
| | | | | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | |
| Description | | Number of
Contracts | | | Expiration
Month | | | Current
Notional | | | Value and
Unrealized
Appreciation/
(Depreciation) | |
Purchased Contracts | |
10 Yr Australian Bond Futures | | | 101 | | | | March 2021 | | | $ | 11,464,210 | | | $ | 20,407 | |
10 Yr Canadian Bond Futures | | | 26 | | | | March 2021 | | | | 3,045,487 | | | | 9,869 | |
E-Mini Russell 2000 Futures | | | 154 | | | | March 2021 | | | | 15,205,960 | | | | 562,645 | |
Mini MSCI EAFE Futures | | | 6 | | | | March 2021 | | | | 639,240 | | | | 8,791 | |
MSCI Emerging Market Futures | | | 447 | | | | March 2021 | | | | 28,791,270 | | | | 830,249 | |
MSCI Singapore IX ETS Futures | | | 299 | | | | January 2021 | | | | 7,314,369 | | | | (44,338 | ) |
S&P Mid 400 E Mini Futures | | | 65 | | | | March 2021 | | | | 14,972,750 | | | | 442,123 | |
U.S. T-Note 10 Yr (CBT) Futures | | | 478 | | | | March 2021 | | | | 66,001,344 | | | | 2,074 | |
|
Sold Contracts | |
Euro STOXX 50 Index Futures | | | 443 | | | | March 2021 | | | | 19,212,280 | | | | (266,222 | ) |
FTSE 100 Index Futures | | | 74 | | | | March 2021 | | | | 6,496,723 | | | | 56,774 | |
Hang Seng Index Futures | | | 27 | | | | January 2021 | | | | 4,739,876 | | | | (147,852 | ) |
S&P 500 E-Mini Futures | | | 23 | | | | March 2021 | | | | 4,311,120 | | | | (101,483 | ) |
SPI 200 Futures | | | 58 | | | | March 2021 | | | | 7,307,565 | | | | 42,354 | |
TOPIX Index Futures | | | 21 | | | | March 2021 | | | | 3,669,992 | | | | (91,262 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | 1,324,129 | |
| | | | | | | | | | | | | | | | |
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 | | | CAD | | | | 1,003 | | | | USD | | | | 769 | | | | 03/15/2021 | | | $ | (19,272 | ) |
Barclays Bank PLC | | | GBP | | | | 821 | | | | USD | | | | 1,088 | | | | 03/15/2021 | | | | (34,585 | ) |
Barclays Bank PLC | | | USD | | | | 6,793 | | | | CAD | | | | 8,799 | | | | 03/15/2021 | | | | 121,134 | |
BNP Paribas SA | | | AUD | | | | 1,551 | | | | USD | | | | 1,174 | | | | 03/15/2021 | | | | (23,001) | |
24
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
BNP Paribas SA | | | GBP | | | | 3,282 | | | | USD | | | | 4,390 | | | | 03/15/2021 | | | $ | (100,218) | |
BNP Paribas SA | | | JPY | | | | 780,952 | | | | USD | | | | 7,534 | | | | 03/15/2021 | | | | (35,694 | ) |
BNP Paribas SA | | | NZD | | | | 1,171 | | | | USD | | | | 831 | | | | 03/15/2021 | | | | (11,972 | ) |
BNP Paribas SA | | | SEK | | | | 20,544 | | | | USD | | | | 2,427 | | | | 03/15/2021 | | | | (72,270 | ) |
BNP Paribas SA | | | USD | | | | 6,161 | | | | EUR | | | | 5,046 | | | | 03/15/2021 | | | | 13,656 | |
Citibank, NA | | | CHF | | | | 6,764 | | | | USD | | | | 7,618 | | | | 03/15/2021 | | | | (38,164 | ) |
Citibank, NA | | | SEK | | | | 21,956 | | | | USD | | | | 2,600 | | | | 03/15/2021 | | | | (71,136 | ) |
Credit Suisse International | | | CHF | | | | 962 | | | | USD | | | | 1,055 | | | | 03/15/2021 | | | | (33,853 | ) |
Goldman Sachs Bank USA | | | EUR | | | | 11,245 | | | | USD | | | | 13,598 | | | | 03/15/2021 | | | | (161,548 | ) |
Goldman Sachs Bank USA | | | USD | | | | 926 | | | | JPY | | | | 96,095 | | | | 03/15/2021 | | | | 5,778 | |
Goldman Sachs Bank USA | | | USD | | | | 1,372 | | | | NZD | | | | 1,952 | | | | 03/15/2021 | | | | 32,901 | |
JPMorgan Chase Bank, NA | | | EUR | | | | 2,294 | | | | USD | | | | 2,735 | | | | 03/15/2021 | | | | (72,187 | ) |
JPMorgan Chase Bank, NA | | | GBP | | | | 756 | | | | USD | | | | 1,004 | | | | 03/15/2021 | | | | (29,564 | ) |
JPMorgan Chase Bank, NA | | | JPY | | | | 324,240 | | | | USD | | | | 3,133 | | | | 03/15/2021 | | | | (9,401 | ) |
JPMorgan Chase Bank, NA | | | SEK | | | | 20,534 | | | | USD | | | | 2,454 | | | | 03/15/2021 | | | | (44,076 | ) |
JPMorgan Chase Bank, NA | | | USD | | | | 1,637 | | | | EUR | | | | 1,344 | | | | 03/15/2021 | | | | 7,001 | |
JPMorgan Chase Bank, NA | | | USD | | | | 875 | | | | JPY | | | | 91,237 | | | | 03/15/2021 | | | | 9,776 | |
JPMorgan Chase Bank, NA | | | USD | | | | 1,102 | | | | NOK | | | | 9,974 | | | | 03/15/2021 | | | | 61,228 | |
JPMorgan Chase Bank, NA | | | USD | | | | 4,537 | | | | SEK | | | | 38,820 | | | | 03/15/2021 | | | | 184,972 | |
Morgan Stanley Capital Services, Inc. | | | AUD | | | | 6,886 | | | | USD | | | | 5,113 | | | | 03/15/2021 | | | | (199,296 | ) |
Morgan Stanley Capital Services, Inc. | | | EUR | | | | 8,243 | | | | USD | | | | 9,963 | | | | 03/15/2021 | | | | (123,488 | ) |
Morgan Stanley Capital Services, Inc. | | | JPY | | | | 391,104 | | | | USD | | | | 3,720 | | | | 03/15/2021 | | | | (70,827 | ) |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 1,832 | | | | GBP | | | | 1,363 | | | | 03/15/2021 | | | | 32,710 | |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 4,125 | | | | JPY | | | | 429,870 | | | | 03/15/2021 | | | | 41,959 | |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 2,804 | | | | SEK | | | | 24,215 | | | | 03/15/2021 | | | | 141,108 | |
Natwest Markets PLC | | | JPY | | | | 249,348 | | | | USD | | | | 2,399 | | | | 03/15/2021 | | | | (18,283 | ) |
State Street Bank & Trust Co. | | | USD | | | | 81 | | | | GBP | | | | 60 | | | | 03/15/2021 | | | | 1,149 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (515,463) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | Non-income producing security. |
| (b) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the aggregate market value of these securities amounted to $2,687,004 or 0.5% of net assets. |
| (c) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (d) | | Security in which significant unobservable inputs (Level 3) were used in determining fair value. |
| (e) | | Fair valued by the Adviser. |
| (f) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov. Additionally, shareholder reports for AB funds can be obtained by calling AB at (800) 227-4618. |
| (g) | | Affiliated investments. |
| (h) | | The rate shown represents the 7-day yield as of period end. |
Currency Abbreviations:
AUD—Australian Dollar
CAD—Canadian Dollar
CHF—Swiss Franc
EUR—Euro
GBP—Great British Pound
JPY—Japanese Yen
NOK—Norwegian Krone
NZD—New Zealand Dollar
SEK—Swedish Krona
USD—United States Dollar
25
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Glossary:
ADR—American Depositary Receipt
CBT—Chicago Board of Trade
EAFE—Europe, Australia, and Far East
ETF—Exchange Traded Fund
ETS—Emission Trading Scheme
FTSE—Financial Times Stock Exchange
MSCI—Morgan Stanley Capital International
REG—Registered Shares
REIT—Real Estate Investment Trust
SPI—Share Price Index
TOPIX—Tokyo Price Index
See notes to financial statements.
26
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $396,150,903) | | $ | 535,891,807 | (a) |
Affiliated issuers (cost $4,267,912—including investment of cash collateral for securities loaned of $66,750) | | | 4,267,912 | |
Cash collateral due from broker | | | 8,594,020 | |
Foreign currencies, at value (cost $558,682) | | | 568,446 | |
Receivable for investment securities sold | | | 4,287,609 | |
Unaffiliated interest and dividends receivable | | | 1,597,945 | |
Unrealized appreciation on forward currency exchange contracts | | | 653,372 | |
Receivable for variation margin on futures | | | 39,942 | |
Receivable for capital stock sold | | | 18,254 | |
Affiliated dividends receivable | | | 166 | |
| | | | |
Total assets | | | 555,919,473 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased | | | 4,892,015 | |
Unrealized depreciation on forward currency exchange contracts | | | 1,168,835 | |
Payable for capital stock redeemed | | | 387,226 | |
Advisory fee payable | | | 322,473 | |
Distribution fee payable | | | 115,256 | |
Payable for collateral received on securities loaned | | | 66,750 | |
Administrative fee payable | | | 20,350 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 160,349 | |
| | | | |
Total liabilities | | | 7,133,400 | |
| | | | |
NET ASSETS | | $ | 548,786,073 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 39,778 | |
Additional paid-in capital | | | 416,890,272 | |
Distributable earnings | | | 131,856,023 | |
| | | | |
| | $ | 548,786,073 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 364,034 | | | | 26,200 | | | $ | 13.89 | |
| | | |
| B | | $ | 548,422,039 | | | | 39,751,803 | | | $ | 13.80 | |
| (a) | | Includes securities on loan with a value of $410,499 (see Note E). |
See notes to financial statements.
27
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $337,706) | | $ | 6,620,074 | |
Affiliated issuers | | | 61,087 | |
Interest | | | 3,805,144 | |
Securities lending income | | | 11,124 | |
| | | | |
| | | 10,497,429 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 3,699,968 | |
Distribution fee—Class B | | | 1,320,485 | |
Transfer agency—Class A | | | 2 | |
Transfer agency—Class B | | | 3,011 | |
Custody and accounting | | | 195,082 | |
Audit and tax | | | 115,181 | |
Administrative | | | 73,581 | |
Legal | | | 50,143 | |
Printing | | | 34,085 | |
Directors’ fees | | | 23,946 | |
Miscellaneous | | | 60,690 | |
| | | | |
Total expenses | | | 5,576,174 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (13,618 | ) |
| | | | |
Net expenses | | | 5,562,556 | |
| | | | |
Net investment income | | | 4,934,873 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions(a) | | | 2,427,646 | |
Forward currency exchange contracts | | | (1,484,368 | ) |
Futures | | | (13,930,447 | ) |
Options written | | | 238,227 | |
Swaps | | | 1,952,050 | |
Foreign currency transactions | | | 730,831 | |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments(b) | | | 28,037,755 | |
Forward currency exchange contracts | | | (168,683 | ) |
Futures | | | 909,334 | |
Foreign currency denominated assets and liabilities | | | 105,311 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 18,817,656 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 23,752,529 | |
| | | | |
| (a) | | Net of foreign capital gains taxes of $46. |
| (b) | | Net of decrease in accrued foreign capital gains taxes of $4,724. |
See notes to financial statements.
28
| | |
|
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 4,934,873 | | | $ | 8,401,682 | |
Net realized loss on investment and foreign currency transactions | | | (10,066,061 | ) | | | (3,231,753 | ) |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 28,883,717 | | | | 73,276,621 | |
| | | | | | | | |
Net increase in net assets from operations | | | 23,752,529 | | | | 78,446,550 | |
Distributions to Shareholders | | | | | | | | |
Class A | | | (6,470 | ) | | | (7,906 | ) |
Class B | | | (7,947,724 | ) | | | (10,638,376 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net decrease | | | (36,380,539 | ) | | | (32,253,889 | ) |
| | | | | | | | |
Total increase (decrease) | | | (20,582,204 | ) | | | 35,546,379 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 569,368,277 | | | | 533,821,898 | |
| | | | | | | | |
End of period | | $ | 548,786,073 | | | $ | 569,368,277 | |
| | | | | | | | |
See notes to financial statements.
29
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Dynamic Asset Allocation Portfolio (the “Portfolio”) is a series of AB Variable Products Series Fund, Inc. (the “Fund”). 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 is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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, 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
30
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments 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
31
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks: | | | | | | | | | | | | | | | | |
Information Technology | | $ | 39,309,180 | | | $ | 14,504,787 | | | $ | –0 | – | | $ | 53,813,967 | |
Financials | | | 14,826,217 | | | | 26,732,560 | | | | –0 | – | | | 41,558,777 | |
Health Care | | | 19,674,699 | | | | 20,702,358 | | | | 0 | (a) | | | 40,377,057 | |
Consumer Discretionary | | | 18,131,090 | | | | 21,022,842 | | | | –0 | – | | | 39,153,932 | |
Industrials | | | 12,351,965 | | | | 24,639,375 | | | | –0 | – | | | 36,991,340 | |
Consumer Staples | | | 10,744,991 | | | | 16,609,575 | | | | –0 | – | | | 27,354,566 | |
Communication Services | | | 15,231,026 | | | | 8,583,610 | | | | –0 | – | | | 23,814,636 | |
Materials | | | 3,743,313 | | | | 13,020,324 | | | | –0 | – | | | 16,763,637 | |
Utilities | | | 3,848,600 | | | | 6,463,292 | | | | –0 | – | | | 10,311,892 | |
Real Estate | | | 3,396,444 | | | | 5,086,028 | | | | –0 | – | | | 8,482,472 | |
Energy | | | 3,234,867 | | | | 5,199,659 | | | | –0 | – | | | 8,434,526 | |
Governments—Treasuries | | | –0 | – | | | 201,593,715 | | | | –0 | – | | | 201,593,715 | |
Investment Companies | | | 27,236,090 | | | | –0 | – | | | –0 | – | | | 27,236,090 | |
Rights | | | 5,200 | | | | –0 | – | | | –0 | – | | | 5,200 | |
Short-Term Investments: | | | | | | | | | | | | | | | | |
Investment Companies | | | 4,201,162 | | | | –0 | – | | | –0 | – | | | 4,201,162 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 66,750 | | | | –0 | – | | | –0 | – | | | 66,750 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 176,001,594 | | | | 364,158,125 | | | | –0 | – | | | 540,159,719 | |
Other Financial Instruments(b): | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Futures | | | 1,975,286 | | | | –0 | – | | | –0 | – | | | 1,975,286 | (c) |
Forward Currency Exchange Contracts | | | –0 | – | | | 653,372 | | | | –0 | – | | | 653,372 | |
Liabilities: | | | | | | | | | | | | | | | | |
Futures | | | (458,967 | ) | | | (192,190 | ) | | | –0 | – | | | (651,157 | )(c) |
Forward Currency Exchange Contracts | | | –0 | – | | | (1,168,835 | ) | | | –0 | – | | | (1,168,835 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 177,517,913 | | | $ | 363,450,472 | | | $ | –0 | – | | $ | 540,968,385 | |
| | | | | | | | | | | | | | | | |
| (a) | | The Portfolio held securities with zero market value at period end. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (c) | | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
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, holding of foreign currencies, currency gains or losses realized between the trade
32
| | |
| |
| | | AB Variable Products Series Fund |
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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 (the “Expense Caps”) to .85% and 1.10% of daily average net assets for Class A and Class B shares, respectively. The Expense Caps will remain in effect until May 1, 2021 and then may be extended by the Adviser for additional one-year terms. For the year ended December 31, 2020, 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, 2020, the reimbursement for such services amounted to $73,581.
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 $1,636 for the year ended December 31, 2020.
33
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $13,253.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 12,784 | | | $ | 153,689 | | | $ | 162,272 | | | $ | 4,201 | | | $ | 61 | |
Government Money Market Portfolio* | | | 0 | | | | 70,835 | | | | 70,768 | | | | 67 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 4,268 | | | $ | 62 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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.
34
| | |
| |
| | | AB Variable Products Series Fund |
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 26,940,720 | | | $ | 66,409,203 | |
U.S. government securities | | | 39,150,753 | | | | 31,427,469 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 402,447,263 | |
| | | | |
Gross unrealized appreciation | | $ | 158,738,204 | |
Gross unrealized depreciation | | | (21,236,571 | ) |
| | | | |
Net unrealized appreciation | | $ | 137,501,633 | |
| | | | |
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 cash collateral 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, 2020, 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”.
35
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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 forward currency exchange contracts. 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, 2020, 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. If a put or call option purchased by the Portfolio were permitted to expire without being sold or exercised, its premium would represent a loss to the Portfolio. 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. The Portfolio’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. 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.
During the year ended December 31, 2020, the Portfolio held written options for hedging and non-hedging purposes.
The Portfolio may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets or currencies. The Portfolio may also enter into swaps for non-hedging purposes as a means of gaining market exposures, 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.
36
| | |
| |
| | | AB Variable Products Series Fund |
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 for OTC swaps 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 clearinghouse on which the transaction is effected. Such amount is shown as cash collateral 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 centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared 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.
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 referenced obligations with the same counterparty.
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
37
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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.
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.
During the year ended December 31, 2020, the Portfolio held credit default swaps for hedging and non-hedging purposes.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 futures | | $ | 32,350 | * | | | | | | |
Equity contracts | | Receivable/Payable for variation margin on futures | | | 1,942,936 | * | | Receivable/Payable for variation margin on futures | | $ | 651,157 | * |
| | | | |
Foreign currency contracts | | Unrealized appreciation on forward currency exchange contracts | | | 653,372 | | | Unrealized depreciation on forward currency exchange contracts | | | 1,168,835 | |
| | | | | | | | | | | | |
Total | | | | $ | 2,628,658 | | | | | $ | 1,819,992 | |
| | | | | | | | | | | | |
| * | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives
Within Statement of Operations | | 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 | | $ | 995,299 | | | $ | 557,967 | |
38
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives
Within Statement of Operations | | 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 | | $ | (14,925,746 | ) | | $ | 351,367 | |
| | | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | | (1,484,368 | ) | | | (168,683 | ) |
| | | |
Equity contracts | | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | | | 238,227 | | | | –0 | – |
| | | |
Credit contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | 1,952,050 | | | | –0 | – |
| | | | | | | | | | |
Total | | | | $ | (13,224,538 | ) | | $ | 740,651 | |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Futures: | | | | |
Average notional amount of buy contracts | | $ | 101,060,610 | |
Average notional amount of sale contracts | | $ | 78,158,386 | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 60,893,633 | |
Average principal amount of sale contracts | | $ | 93,564,381 | |
Options Written: | | | | |
Average notional amount | | $ | 28,400,000 | (a) |
Centrally Cleared Credit Default Swaps: | | | | |
Average notional amount of sale contracts | | $ | 17,648,038 | (b) |
| (a) | | Positions were open for one month during the year. |
| (b) | | Positions were open for eight 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 OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets
Subject to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Received* | | | Security Collateral
Received* | | | Net Amount of
Derivative Assets | |
Barclays Bank PLC | | $ | 121,134 | | | $ | (34,585 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 86,549 | |
BNP Paribas SA | | | 13,656 | | | | (13,656 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Goldman Sachs Bank USA | | | 38,679 | | | | (38,679 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank, NA | | | 262,977 | | | | (155,228 | ) | | | –0 | – | | | –0 | – | | | 107,749 | |
Morgan Stanley Capital Services, Inc. | | | 215,777 | | | | (215,777 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 1,149 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 1,149 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 653,372 | | | $ | (457,925 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 195,447 | ^ |
| | | | | | | | | | | | | | | | | | | | |
39
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities
Subject to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Pledged* | | | Security Collateral
Pledged* | | | Net Amount of
Derivative Liabilities | |
Bank of America, NA | | $ | 19,272 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 19,272 | |
Barclays Bank PLC | | | 34,585 | | | | (34,585 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
BNP Paribas SA | | | 243,155 | | | | (13,656 | ) | | | –0 | – | | | –0 | – | | | 229,499 | |
Citibank, NA | | | 109,300 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 109,300 | |
Credit Suisse International | | | 33,853 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 33,853 | |
Goldman Sachs Bank USA | | | 161,548 | | | | (38,679 | ) | | | –0 | – | | | –0 | – | | | 122,869 | |
JPMorgan Chase Bank, NA | | | 155,228 | | | | (155,228 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley Capital Services, Inc. | | | 393,611 | | | | (215,777 | ) | | | –0 | – | | | –0 | – | | | 177,834 | |
Natwest Markets PLC | | | 18,283 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 18,283 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,168,835 | | | $ | (457,925 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 710,910 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the
40
| | |
| |
| | | AB Variable Products Series Fund |
Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Government Money Market
Portfolio | |
Market Value of
Securities
on Loan* | | | Cash Collateral* | | | Market Value of
Non-Cash
Collateral* | | | Income from
Borrowers | | | Income
Earned | | | Advisory Fee
Waived | |
| $ | 410,499 | | | $ | 66,750 | | | $ | 358,901 | | | $ | 9,685 | | | $ | 1,439 | | | $ | 365 | |
| * | | As of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 6,869 | | | | 3,650 | | | | | | | $ | 86,958 | | | $ | 46,170 | |
Shares issued in reinvestment of dividends and distributions | | | 502 | | | | 618 | | | | | | | | 6,470 | | | | 7,906 | |
Shares redeemed | | | (9,641 | ) | | | (5,604 | ) | | | | | | | (126,155 | ) | | | (71,327 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (2,270 | ) | | | (1,336 | ) | | | | | | $ | (32,727 | ) | | $ | (17,251 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 1,311,598 | | | | 2,194,218 | | | | | | | $ | 16,672,485 | | | $ | 28,084,156 | |
Shares issued in reinvestment of dividends and distributions | | | 619,947 | | | | 837,008 | | | | | | | | 7,947,724 | | | | 10,638,376 | |
Shares redeemed | | | (4,763,950 | ) | | | (5,568,513 | ) | | | | | | | (60,968,021 | ) | | | (70,959,170 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (2,832,405 | ) | | | (2,537,287 | ) | | | | | | $ | (36,347,812 | ) | | $ | (32,236,638 | ) |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 91% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), 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 existing 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 and accrued interest. 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.
41
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Allocation Risk—The allocation of investments among different global asset classes may have a significant effect on the Portfolio’s net asset value, or NAV, when one of these asset classes is performing more poorly than others. As both the direct investments and derivatives positions will be periodically adjusted to reflect the Adviser’s view of market and economic conditions, there will be transaction costs that 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 more difficult to trade 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, and because these investments may be 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—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 on the statement of assets and liabilities.
Leverage Risk—When the Portfolio borrows money or otherwise leverages its investments, its performance 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 or by borrowing money. The use of other types of derivative instruments by the Portfolio, such as 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.
Illiquid Investments Risk—Illiquid investment risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Portfolio shares.
Capitalization Risk—Investments in small- and mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in small- and mid-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 the 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.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or
42
| | |
| |
| | | AB Variable Products Series Fund |
any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 7,954,194 | | | $ | 10,014,238 | |
| | | | | | | | |
Net long-term capital gains | | | –0 | – | | | 632,044 | |
| | | | | | | | |
Total taxable distributions paid | | $
| 7,954,194
|
| | $ | 10,646,282 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 5,046,295 | |
Accumulated capital and other losses | | | (10,830,539 | )(a) |
Unrealized appreciation/(depreciation) | | | 137,640,267 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 131,856,023 | |
| | | | |
| (a) | | As of December 31, 2020, the Portfolio had a net capital loss carryforward of $9,767,499. As of December 31, 2020, the cumulative deferred loss on straddles was $1,063,040. |
| (b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, return of capital distributions received from underlying securities, the tax treatment of passive foreign investment companies (PFICs), the tax deferral of losses on wash sales, the tax treatment of partnership investments, and corporate restructuring. |
43
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio had a net short-term capital loss carryforward of $7,544,796 and a net long-term capital loss carryforward of $2,222,703, which may be carried forward for an indefinite period.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings 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.
44
| | |
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $13.46 | | | | $11.91 | | | | $13.07 | | | | $11.63 | | | | $11.33 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .15 | | | | .23 | | | | .20 | | | | .17 | | | | .13† | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .51 | | | | 1.60 | | | | (1.11 | ) | | | 1.52 | | | | .27 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .66 | | | | 1.83 | | | | (.91 | ) | | | 1.69 | | | | .40 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.23 | ) | | | (.27 | ) | | | (.23 | ) | | | (.25 | ) | | | (.10 | ) |
Distributions from net realized gain on investment transactions | | | –0 | – | | | (.01 | ) | | | (.02 | ) | | | –0 | – | | | (.00 | )(c) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.23 | ) | | | (.28 | ) | | | (.25 | ) | | | (.25 | ) | | | (.10 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $13.89 | | | | $13.46 | | | | $11.91 | | | | $13.07 | | | | $11.63 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d) | | | 5.02 | % | | | 15.51 | % | | | (7.07 | )% | | | 14.67 | % | | | 3.59 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $364 | | | | $383 | | | | $355 | | | | $328 | | | | $303 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)‡ | | | .80 | % | | | .80 | % | | | .78 | % | | | .77 | % | | | .79 | % |
Expenses, before waivers/reimbursements (e)‡ | | | .80 | % | | | .80 | % | | | .79 | % | | | .78 | % | | | .81 | % |
Net investment income (b) | | | 1.18 | % | | | 1.78 | % | | | 1.60 | % | | | 1.39 | % | | | 1.11 | %† |
Portfolio turnover rate | | | 13 | % | | | 19 | % | | | 24 | % | | | 20 | % | | | 64 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .01 | % | | | .02 | % | | | .03 | % | | | .04 | % | | | .04 | % |
See footnote summary on page 46.
45
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| FINANCIAL HIGHLIGHTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $13.36 | | | | $11.82 | | | | $12.98 | | | | $11.56 | | | | $11.26 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .12 | | | | .19 | | | | .17 | | | | .14 | | | | .10† | |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .51 | | | | 1.60 | | | | (1.11 | ) | | | 1.50 | | | | .27 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .63 | | | | 1.79 | | | | (.94 | ) | | | 1.64 | | | | .37 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.19 | ) | | | (.24 | ) | | | (.20 | ) | | | (.22 | ) | | | (.07 | ) |
Distributions from net realized gain on investment transactions | | | –0 | – | | | (.01 | ) | | | (.02 | ) | | | –0 | – | | | (.00 | )(c) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.19 | ) | | | (.25 | ) | | | (.22 | ) | | | (.22 | ) | | | (.07 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $13.80 | | | | $13.36 | | | | $11.82 | | | | $12.98 | | | | $11.56 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d) | | | 4.86 | % | | | 15.24 | % | | | (7.35 | )% | | | 14.32 | % | | | 3.37 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $548,422 | | | | $568,985 | | | | $533,467 | | | | $604,703 | | | | $558,725 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)‡ | | | 1.05 | % | | | 1.05 | % | | | 1.03 | % | | | 1.03 | % | | | 1.05 | % |
Expenses, before waivers/reimbursements (e)‡ | | | 1.06 | % | | | 1.05 | % | | | 1.04 | % | | | 1.04 | % | | | 1.07 | % |
Net investment income (b) | | | .93 | % | | | 1.51 | % | | | 1.35 | % | | | 1.15 | % | | | .89 | %† |
Portfolio turnover rate | | | 13 | % | | | 19 | % | | | 24 | % | | | 20 | % | | | 64 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
Portfolios | | | .01 | % | | | .02 | % | | | .03 | % | | | .04 | % | | | .04 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Amount is less than $.005. |
| (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. |
| (e) | | In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the years ended December 31, 2018, December 31, 2017 and December 31, 2016, such waiver amounted to .01%, .01% and .02%, respectively. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total
Return |
| $.00005 | | .0004% | | .0004% |
See notes to financial statements.
46
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Dynamic Asset Allocation Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Dynamic Asset Allocation Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
47
| | |
| | |
| | |
| |
| 2020 TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 35.60% of dividends paid qualify for the dividends received deduction.
48
| | |
| | |
| DYNAMIC ASSET ALLOCATION | | |
| |
| PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Brian T. Brugman(2), Vice President Daniel J. Loewy(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 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 (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. Messrs. Brugman and Loewy are the investment professionals primarily responsible for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
49
| | |
| | | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| |
| MANAGEMENT OF THE FUND | | AB 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 INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| INTERESTED DIRECTOR |
| | | | | | | | |
Robert M. Keith,#
1345 Avenue of the Americas
New York, NY 10105
60
(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 . | | | 74 | | | None |
| | | | | | | | |
| INDEPENDENT DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,##
Chairman of the Board
79
(2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership, and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
50
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) |
| | | | | | | | |
Jorge A. Bermudez,##
69
(2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
| | | | | | | | |
Michael J. Downey,##
77
(2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,##
72
(2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
51
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) |
| | | | | | | | |
Jeanette W. Loeb,##
68
(2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen,##
65
(2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
52
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) |
| | | | | | | | |
Garry L. Moody,##
68
(2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
| | | | | | | | |
Earl D. Weiner,##
81
(2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
53
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB 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 (5) YEARS |
Robert M. Keith^ 60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Brian T. Brugman 40 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Daniel J. Loewy 46 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer and Head of Multi-Asset Solutions and Chief Investment Officer for Dynamic Asset Allocation. |
| | | | |
Emilie D. Wrapp 65 | | Secretary | | Senior Vice President, Assistant General Counsel, and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes 44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo 61 | | Treasurer and Chief
Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke 60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto 56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
54
| | |
| | |
| | |
| |
| DYNAMIC ASSET ALLOCATION PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
55
| | |
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO | | |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Dynamic Asset Allocation Portfolio (the “Fund”) at a meeting held by video conference on August 4-5, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the
56
| | |
| |
| | | AB Variable Products Series Fund |
Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended May 31, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review and their discussion with the Adviser of the reasons for the Fund’s underperformance in the periods reviewed, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual advisory fee rate with a peer group median and noted that it was above the median. The directors also took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to the those of Fund, on the other. 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 previously discussed these matters with an independent fee consultant.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the
57
| | |
| DYNAMIC ASSET ALLOCATION PORTFOLIO |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund invests 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, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund is for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The Adviser had agreed to cap the Fund’s expenses, but the directors noted that the Fund’s expense ratio was currently below the level of the Adviser’s cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the medians. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund does not contain breakpoints and that they had previously discussed their strong preference 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s asset level (which was well below the level at which they would anticipate adding an initial breakpoint) and its profitability to the Adviser and anticipated revisiting the question of breakpoints in the future if circumstances warranted doing so.
58
VPS-DAA-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS SERIES FUND, INC.
| + | | GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | | |
| |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Global Risk Allocation—Moderate Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to seek long-term growth of capital while seeking to limit volatility. In making decisions on the allocation of assets among “growth assets” and “safety assets,” the Adviser uses a risk-weighted allocation methodology based on the expected “tail risk” of each asset class. For purposes of the Portfolio, growth assets include global equities and, at times, high-yield fixed-income securities (commonly known as “junk bonds”), and safety assets include government securities of developed countries. This strategy attempts to provide investors with favorable long-term total return while minimizing exposure to material or “tail” losses. To execute this strategy, the percentage loss that will constitute a tail loss is calculated for each asset class based on historical market behavior and on a forward-looking basis through options prices. Portfolio assets are then allocated among asset classes so that growth assets contribute the majority of the expected risk of tail loss (“tail risk”) of the Portfolio, and safety assets contribute a lesser amount of tail risk. The Adviser makes frequent adjustments to the Portfolio’s asset-class exposures based on these tail-risk determinations. To help limit tail risk, the Portfolio utilizes a risk-management strategy involving the purchase of put options and sale of call options on equity indices, equity index futures or exchange-traded funds (“ETFs”). The Adviser will on a best-efforts basis seek to limit the volatility of the Portfolio to no more than 10% on an annualized basis. Actual results may vary.
The Adviser also assesses tail risk on a security, sector and country basis, and makes adjustments to the Portfolio’s allocations within each asset class when practicable. The Portfolio may invest in fixed-income securities with a range of maturities from short- to long-term. The Adviser expects that the Portfolio’s investments in high-yield fixed-income securities will not exceed 10% of the Portfolio’s net assets. The Portfolio’s investments in each asset class will generally be global in nature.
The Adviser expects to utilize a variety of derivatives in its management of the Portfolio, including futures contracts, options, swaps and forwards. Derivatives often provide more efficient and economical exposure to market segments than direct investments, and the Portfolio may utilize derivatives and ETFs to gain exposure to equity and fixed-income asset classes. Because derivatives transactions frequently require cash outlays that are only a small portion of the amount of exposure obtained through the derivative, a portion of the Portfolio’s assets may be held in cash or invested in cash equivalents to cover the Portfolio’s derivatives obligations, such as short-term US government and agency securities, repurchase agreements and money-market funds. At times, a combination of direct securities investments and derivatives will be used to gain asset-class exposure so that the Portfolio’s aggregate exposure will substantially exceed its net assets (i.e., so that the Portfolio is effectively leveraged).
Currency exchange-rate fluctuations can have a dramatic impact on returns. The Adviser may seek to hedge all or a portion of the currency exposure resulting from Portfolio investments through currency-related derivatives, or decide not to hedge this exposure.
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 (net, USD hedged) and a 60%/40% blend of the MSCI World Index (net, USD hedged) and the Bloomberg Barclays Global G7 Treasury Index (USD hedged), for the one- and five-year periods ended December 31, 2020, and the period since the Portfolio’s inception on April 28, 2015.
All share classes of the Portfolio underperformed the primary and blended benchmarks for the annual period. The Portfolio allocated most of its risk to global equity, with the balance allocated to government bonds. The Portfolio’s systematic equity downside protection strategy detracted from performance for the whole period. The Portfolio’s timing of equity relative to bond exposures detracted from performance versus the blended benchmark, mainly because of an underweight of equity exposure due to the risk cap, when the ex-ante risk measure post market crisis remained high during the equity rebound after March. Tactical currency hedging decisions contributed to relative performance.
During the annual period, the Portfolio utilized derivatives for hedging and investment purposes, including futures, forwards, written options, written swaptions and interest rate swaps, which detracted from absolute returns, while variance swaps and purchased options added and purchased swaptions had no material impact.
MARKET REVIEW AND INVESTMENT STRATEGY
US, international and emerging-market equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March
1
| | |
| |
| | | AB Variable Products Series Fund |
when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
Global fixed-income market returns were positive yet volatile over the annual period. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, setting the stage for a rebound in risk assets following the initial sell-off in March. Government bonds rallied as interest rates were slashed. Risk assets began to rally significantly in November when positive vaccine news extended the credit rally. Developed-market and emerging-market investment-grade corporate bonds and commercial mortgage-backed securities led gains as investors searched for higher yields in a period of falling interest rates. Global developed-market high-yield corporate bonds also had strong returns, particularly in the US. Agency mortgage-backed securities, along with emerging-market local-currency debt and high-yield hard-currency sovereign bonds, had positive returns but trailed global treasuries. The US dollar declined against all major developed-market currencies and was mixed against emerging-market currencies. Brent crude oil prices were volatile and fell about 21% due to an uncertain oil industry outlook. Copper prices advanced more than 25%, and gold rose 24% as a perceived inflation hedge.
2
| | |
| | | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The MSCI World Index and Bloomberg Barclays Global G7 Treasury Index are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI World Index (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets, hedged to the US dollar. The Bloomberg Barclays Global G7 Treasury Index tracks fixed-rate local-currency government debt of investment-grade G7 countries. 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. Net returns reflect the reinvestment of dividends after deduction of non-US withholding tax. 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 investments 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Allocation Risk: The allocation of investments among asset classes may have a significant effect on the Portfolio’s net asset value (“NAV”) when the asset classes in which the Portfolio has invested more heavily perform worse than the asset classes invested in less heavily.
Interest-Rate Risk: Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing 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 and accrued interest. 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.
High-Yield Securities Risk: Investments in fixed-income securities with ratings below investment-grade (commonly known as “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 and negative perceptions of the junk bond market generally, and may be more difficult to trade than other types of securities.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be difficult to trade 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.
Investment in Other Investment Companies Risk: As with other investments, investments in other investment companies, including ETFs, are subject to market and selection risk. In addition, Contractholders of the Portfolio bear both their proportionate share of expenses in the Portfolio (including management fees) and, indirectly, the expenses of the investment companies in which the Portfolio invests.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Leverage Risk: Because 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.
(Disclosures, Risks and Note about Historical Performance continued on next page)
3
| | |
| | | |
| DISCLOSURES AND RISKS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of illiquid investments risk may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well-developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline.
Non-Diversification Risk: The Portfolio may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, changes in the value of a single security may have a more significant effect, either negative or positive, on the Portfolio’s 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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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.
4
| | |
| | | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
THE PORTFOLIO VS. ITS BENCHMARKS PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | Net Asset Value Returns | |
| | 1 Year | | | 5 Years | | | Since Inception1 | |
| | | |
| Global Risk Allocation—Moderate Portfolio Class A | | | 2.72% | | | | 6.12% | | | | 4.23% | |
| | | |
| Global Risk Allocation—Moderate Portfolio Class B | | | 2.45% | | | | 5.86% | | | | 3.97% | |
| | | |
| Primary Benchmark: MSCI World Index (net, USD hedged) | | | 14.27% | | | | 12.30% | | | | 9.71% | |
| | | |
Blended Benchmark: 60% MSCI World Index (net, USD hedged)/
40% Bloomberg Barclays Global G7 Treasury Index (USD hedged) | | | 11.41% | | | | 9.26% | | | | 7.51% | |
1 ��� Inception date: 4/28/2015. | | | | | | | | | | | | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 1.02% and 1.27% 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 exclusive of interest expense, taxes, extraordinary expenses, expenses associated with securities sold short, and brokerage commissions and other transaction costs to 0.75% and 1.00% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, and may be extended by the Adviser for additional one-year terms. 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 OF A $10,000 INVESTMENT
4/28/20151 TO 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Global Risk Allocation—Moderate Portfolio Class A shares (from 4/28/20151 to 12/31/2020) as compared to the performance of the Portfolio’s benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
| 1 | | Inception date: 4/28/2015. |
See Disclosures, Risks and Note About Historical Performance on pages 3-4.
5
| | |
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | | | Total
Expenses Paid
During Period+ | | | Total
Annualized
Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,101.50 | | | $ | 3.64 | | | | 0.69 | % | | $ | 3.96 | | | | 0.75 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.67 | | | $ | 3.51 | | | | 0.69 | % | | $ | 3.81 | | | | 0.75 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,100.30 | | | $ | 4.96 | | | | 0.94 | % | | $ | 5.28 | | | | 1.00 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.41 | | | $ | 4.77 | | | | 0.94 | % | | $ | 5.08 | | | | 1.00 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| + | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fund fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees and expenses from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain affiliated/unaffiliated underlying portfolios acquired fund fees and expenses. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro-rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
6
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| SECURITY TYPE BREAKDOWN1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| SECURITY TYPE | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Investment Companies | | $ | 42,010,198 | | | | 48.4 | % |
Inflation-Linked Securities | | | 11,941,667 | | | | 13.8 | |
Options Purchased—Puts | | | 108,971 | | | | 0.1 | |
Short-Term Investments | | | 32,750,984 | | | | 37.7 | |
| | | | | | | | | |
Total Investments | | $ | 86,811,820 | | | | 100.0 | % |
COUNTRY BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
United States | | $ | 46,442,079 | | | | 53.5 | % |
Japan | | | 7,585,147 | | | | 8.8 | |
Germany | | | 20,072 | | | | 0.0 | |
United Kingdom | | | 13,538 | | | | 0.0 | |
Short-Term Investments | | | 32,750,984 | | | | 37.7 | |
| | | | | | | | | |
Total Investments | | $ | 86,811,820 | | | | 100.0 | % |
| 1 | | All data are as of December 31, 2020. 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 or investment purposes (see “Portfolio of Investments” section of the report for additional details). |
| 2 | | All data are as of December 31, 2020. The Portfolio’s country breakdown is expressed as a percentage of total investments and may vary over time. |
7
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
Company | | | | | Shares | | | U.S. $ Value | |
| | | | | | | | | | | | |
INVESTMENT COMPANIES–46.8% | | | | | | | | | | | | |
FUNDS AND INVESTMENT TRUSTS–46.8%(a) | | | | | | | | | | | | |
iShares Core MSCI EAFE ETF | | | | | | | 76,670 | | | $ | 5,297,131 | |
iShares Core S&P 500 ETF | | | | | | | 31,275 | | | | 11,740,322 | |
iShares MSCI EAFE ETF | | | | | | | 75,980 | | | | 5,543,501 | |
SPDR S&P 500 ETF Trust | | | | | | | 18,981 | | | | 7,096,616 | |
Vanguard S&P 500 ETF | | | | | | | 35,883 | | | | 12,332,628 | |
| | | | | | | | | | | | |
Total Investment Companies
(cost $28,914,512) | | | | | | | | | | | 42,010,198 | |
| | | | | | | | | | | | |
| | | | | | Principal
Amount
(000) | | | | |
INFLATION-LINKED SECURITIES–13.3% | | | | | | | | | | | | |
JAPAN–8.4% | | | | | | | | | | | | |
Japanese Government CPI Linked Bond
Series 22
0.10%, 03/10/2027 | | | JPY | | | | 779,137 | | | | 7,583,636 | |
| | | | | | | | | | | | |
UNITED STATES–4.9% | | | | | | | | | | | | |
U.S. Treasury Inflation Indexed Bonds
0.375%, 07/15/2025 (TIPS)(b) | | $ | | | | | 3,969 | | | | 4,358,031 | |
| | | | | | | | | | | | |
Total Inflation-Linked Securities
(cost $11,350,660) | | | | | | | 11,941,667 | |
| | | | | | | | | | | | |
| | | | | | Notional
Amount | | | | |
OPTIONS PURCHASED–PUTS–0.1% | | | | | | | | | | | | |
OPTIONS ON FUNDS AND INVESTMENT TRUSTS–0.1% | | | | | | | | | | | | |
SPDR S&P 500 ETF Trust
Expiration: Jan 2021; Contracts: 3,500; Exercise Price:
USD 3,630.00;
Counterparty: Morgan Stanley & Co., Inc.(c) | | | USD | | | | 12,705,000 | | | | 73,850 | |
| | | | | | | | | | | | |
OPTIONS ON
EQUITY INDICES–0.0% | | | | | |
Euro STOXX 50 Index
Expiration: Jan 2021; Contracts: 530; Exercise Price: EUR 3,475.00;
Counterparty: Morgan Stanley & Co., Inc.(c) | | | EUR | | | | 1,841,750 | | | | 20,072 | |
Company | | | | | Notional
Amount | | | U.S. $ Value | |
| | | | | | | | | | | | |
FTSE 100 Index
Expiration: Jan 2021; Contracts: 110; Exercise Price: GBP 6,400.00;
Counterparty: Morgan Stanley & Co., Inc.(c) | | | GBP | | | | 704,000 | | | $ | 13,538 | |
Nikkei 225 Index
Expiration: Jan 2021; Contracts: 6,000; Exercise Price:
JPY 26,000.00;
Counterparty: Morgan Stanley & Co., Inc.(c) | | | JPY | | | | 156,000,000 | | | | 1,511 | |
| | | | | | | | | | | | |
| | | | | | | 35,121 | |
| | | | | | | | | | | | |
Total Options Purchased–Puts
(premiums paid $250,160) | | | | | | | | | | | 108,971 | |
| | | | | | | | | | | | |
| | | | | | Principal
Amount
(000) | | | | |
SHORT-TERM INVESTMENTS–36.6% | | | | | | | | | | | | |
| | | | | | | | | | | | |
GOVERNMENTS–
TREASURIES–20.0% | | | | | | | | | | | | |
GERMANY–20.0% | | | | | | | | | | | | |
German Treasury Bill
Zero Coupon, 03/03/2021(d)
(cost $18,005,938) | | | EUR | | | | 14,665 | | | | 17,937,534 | |
| | | | | | | | | | | | |
| | | | | | Shares | | | | |
INVESTMENT COMPANIES–13.6% | | | | | | | | | | | | |
AB Fixed Income Shares, Inc.–Government
Money Market Portfolio–Class AB, 0.03%(a)(e)(f)
(cost $12,179,518) | | | | | | | 12,179,518 | | | | 12,179,518 | |
| | | | | | | | | | | | |
| | | | | | Principal
Amount
(000) | | | | |
| | | | | |
U.S. TREASURY BILLS–3.0% | | | | | |
U.S. Treasury Bill
Zero Coupon, 01/21/2021
(cost $2,633,868) | | $ | | | | | 2,634 | | | | 2,633,932 | |
| | | | | | | | | | | | |
Total Short-Term Investments
(cost $32,819,324) | | | | | | | | | | | 32,750,984 | |
| | | | | | | | | | | | |
TOTAL
INVESTMENTS–96.8%
(cost $73,334,656) | | | | | | | | | | | 86,811,820 | |
Other assets less
liabilities–3.2% | | | | | | | | | | | 2,896,118 | |
| | | | | | | | | | | | |
NET ASSETS–100.0% | | | | | | | | | | $ | 89,707,938 | |
| | | | | | | | | | | | |
8
| | |
| |
| | | AB Variable Products Series Fund |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | |
| Description | | Number of
Contracts | | | Expiration
Month | | | Current
Notional | | | Value and
Unrealized
Appreciation/
(Depreciation) | |
Purchased Contracts | |
10 Yr Canadian Bond Futures | | | 5 | | | | March 2021 | | | $ | 585,671 | | | $ | 2,623 | |
10 Yr Mini Japan Government Bond Futures | | | 72 | | | | March 2021 | | | | 10,587,846 | | | | (8,868 | ) |
Euro STOXX 50 Index Futures | | | 58 | | | | March 2021 | | | | 2,515,377 | | | | 16,752 | |
Euro-BOBL Futures | | | 8 | | | | March 2021 | | | | 1,321,141 | | | | 193 | |
Euro-BTP Futures | | | 12 | | | | March 2021 | | | | 2,228,436 | | | | 23,438 | |
Euro-Bund Futures | | | 4 | | | | March 2021 | | | | 868,056 | | | | 1,851 | |
Euro-OAT Futures | | | 14 | | | | March 2021 | | | | 2,870,926 | | | | 14,175 | |
FTSE 100 Index Futures | | | 11 | | | | March 2021 | | | | 965,729 | | | | (14,250 | ) |
Long Gilt Futures | | | 27 | | | | March 2021 | | | | 5,004,479 | | | | 50,924 | |
Mini MSCI Emerging Market Futures | | | 10 | | | | January 2021 | | | | 244,628 | | | | (1,318 | ) |
Nikkei 225 (CME) Futures | | | 7 | | | | March 2021 | | | | 963,725 | | | | 28,678 | |
S&P 500 E-Mini Futures | | | 28 | | | | March 2021 | | | | 5,248,320 | | | | 93,880 | |
S&P Mid 400 E-Mini Futures | | | 5 | | | | March 2021 | | | | 1,151,750 | | | | 30,715 | |
S&P/TSX 60 Index Futures | | | 13 | | | | March 2021 | | | | 2,101,610 | | | | (25,416 | ) |
SPI 200 Futures | | | 3 | | | | March 2021 | | | | 377,977 | | | | (6,155 | ) |
TOPIX Index Futures | | | 13 | | | | January 2021 | | | | 296,772 | | | | (1,191 | ) |
TOPIX Index Futures | | | 6 | | | | March 2021 | | | | 1,048,569 | | | | 32,210 | |
U.S. T-Note 5 Yr (CBT) Futures | | | 19 | | | | March 2021 | | | | 2,397,117 | | | | 5,908 | |
U.S. T-Note 10 Yr (CBT) Futures | | | 37 | | | | March 2021 | | | | 5,108,891 | | | | 6,317 | |
U.S. Ultra Bond (CBT) Futures | | | 5 | | | | March 2021 | | | | 1,067,813 | | | | (16,727 | ) |
|
Sold Contracts | |
10 Yr Mini Japan Government Bond Futures | | | 6 | | | | March 2021 | | | | 882,320 | | | | 78 | |
| | | | | | | | | | | | | | | | |
| | | $ | 233,817 | |
| | | | | | | | | | | | | | | | |
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 | | | | 679 | | | | AUD | | | | 963 | | | | 01/12/2021 | | | $ | 63,589 | |
Citibank, NA | | | GBP | | | | 1,187 | | | | USD | | | | 1,584 | | | | 01/21/2021 | | | | (39,925 | ) |
Citibank, NA | | | USD | | | | 1,152 | | | | GBP | | | | 858 | | | | 01/21/2021 | | | | 21,078 | |
Citibank, NA | | | CAD | | | | 514 | | | | USD | | | | 400 | | | | 02/18/2021 | | | | (4,136 | ) |
Citibank, NA | | | USD | | | | 1,780 | | | | EUR | | | | 1,457 | | | | 03/17/2021 | | | | 3,174 | |
HSBC Bank USA | | | AUD | | | | 1,050 | | | | USD | | | | 749 | | | | 01/12/2021 | | | | (60,423 | ) |
HSBC Bank USA | | | CHF | | | | 913 | | | | USD | | | | 1,005 | | | | 01/29/2021 | | | | (27,220 | ) |
Morgan Stanley Capital Services, Inc. | | | EUR | | | | 876 | | | | USD | | | | 1,073 | | | | 03/17/2021 | | | | 722 | |
Morgan Stanley Capital Services, Inc. | | | EUR | | | | 3,178 | | | | USD | | | | 3,885 | | | | 03/17/2021 | | | | (3,363 | ) |
Standard Chartered Bank | | | USD | | | | 717 | | | | AUD | | | | 979 | | | | 01/12/2021 | | | | 37,988 | |
State Street Bank & Trust Co. | | | AUD | | | | 1,075 | | | | USD | | | | 797 | | | | 01/12/2021 | | | | (31,961 | ) |
State Street Bank & Trust Co. | | | SEK | | | | 5,151 | | | | USD | | | | 597 | | | | 01/15/2021 | | | | (28,961 | ) |
State Street Bank & Trust Co. | | | USD | | | | 347 | | | | SEK | | | | 2,941 | | | | 01/15/2021 | | | | 10,123 | |
State Street Bank & Trust Co. | | | GBP | | | | 281 | | | | USD | | | | 376 | | | | 01/21/2021 | | | | (8,169 | ) |
State Street Bank & Trust Co. | | | USD | | | | 450 | | | | GBP | | | | 334 | | | | 01/21/2021 | | | | 6,463 | |
9
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
State Street Bank & Trust Co. | | | CAD | | | | 801 | | | | USD | | | | 621 | | | | 02/18/2021 | | | $ | (8,486 | ) |
State Street Bank & Trust Co. | | | USD | | | | 1,471 | | | | CAD | | | | 1,884 | | | | 02/18/2021 | | | | 9,316 | |
State Street Bank & Trust Co. | | | JPY | | | | 2,150,475 | | | | USD | | | | 20,666 | | | | 02/26/2021 | | | | (173,666 | ) |
State Street Bank & Trust Co. | | | USD | | | | 9,124 | | | | JPY | | | | 944,579 | | | | 02/26/2021 | | | | 29,885 | |
State Street Bank & Trust Co. | | | EUR | | | | 14,688 | | | | USD | | | | 18,064 | | | | 03/17/2021 | | | | 91,151 | |
State Street Bank & Trust Co. | | | USD | | | | 898 | | | | EUR | | | | 736 | | | | 03/17/2021 | | | | 2,205 | |
UBS AG | | | AUD | | | | 406 | | | | USD | | | | 307 | | | | 01/12/2021 | | | | (6,381 | ) |
UBS AG | | | GBP | | | | 577 | | | | USD | | | | 765 | | | | 01/21/2021 | | | | (24,443 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | (141,440 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
PUT OPTIONS WRITTEN (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Counterparty | | | Contracts | | | Exercise
Price | | | Expiration
Month | | | Notional
(000) | | | Premiums
Received | | | U.S.
$ Value | |
Euro STOXX 50 Index(g) | |
| Morgan Stanley &
Co., Inc. |
| | | 53 | | | | EUR | | | | 3,325.00 | | | | January 2021 | | | | EUR | | | | 1,762 | | | $ | 12,927 | | | $ | (8,320 | ) |
FTSE 100 Index(g) | |
| Morgan Stanley & Co.,
Inc. |
| | | 11 | | | | GBP | | | | 6,050.00 | | | | January 2021 | | | | GBP | | | | 666 | | | | 4,212 | | | | (4,062 | ) |
Nikkei 225 Index(h) | |
| Morgan Stanley & Co.,
Inc. |
| | | 6 | | | | JPY | | | | 24,750.00 | | | | January 2021 | | | | JPY | | | | 148,500 | | | | 6,038 | | | | (610 | ) |
SPDR S&P 500 ETF Trust(i) | |
| Morgan Stanley & Co.,
Inc. |
| | | 35 | | | | USD | | | | 3,470.00 | | | | January 2021 | | | | USD | | | | 12,145 | | | | 88,969 | | | | (28,525 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | 112,146 | | | $ | (41,517 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10
| | |
| |
| | | AB Variable Products Series Fund |
| (a) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov. Additionally, shareholder reports for AB funds can be obtained by calling AB at (800) 227-4618. |
| (b) | | Position, or a portion thereof, has been segregated to collateralize margin requirements for open exchange-traded derivatives. |
| (c) | | Non-income producing security. |
| (d) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the market value of this security amounted to $17,937,534 or 20.0% of net assets. |
| (e) | | Affiliated investments. |
| (f) | | The rate shown represents the 7-day yield as of period end. |
| (g) | | One contract relates to 10 shares. |
| (h) | | One contract relates to 1,000 shares. |
| (i) | | One contract relates to 100 shares. |
Currency Abbreviations:
AUD—Australian Dollar
CAD—Canadian Dollar
CHF—Swiss Franc
EUR—Euro
GBP—Great British Pound
JPY—Japanese Yen
SEK—Swedish Krona
USD—United States Dollar
Glossary:
BOBL—Bundesobligationen
BTP—Buoni del Tesoro Poliennali
CBT—Chicago Board of Trade
CME—Chicago Mercantile Exchange
CPI—Consumer Price Index
EAFE—Europe, Australia, and Far East
ETF—Exchange Traded Fund
FTSE—Financial Times Stock Exchange
MSCI—Morgan Stanley Capital International
OAT—Obligations Assimilables du Trésor
SPDR—Standard & Poor’s Depository Receipt
SPI—Share Price Index
TIPS—Treasury Inflation Protected Security
TOPIX—Tokyo Price Index
TSX—Toronto Stock Exchange
See notes to financial statements.
11
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
ASSETS | |
Investments in securities, at value | |
Unaffiliated issuers (cost $61,155,138) | | $ | 74,632,302 | |
Affiliated issuers (cost $12,179,518) | | | 12,179,518 | |
Cash collateral due from broker | | | 1,383,495 | |
Foreign currencies, at value (cost $1,465,595) | | | 1,483,648 | |
Receivable for capital stock sold | | | 314,976 | |
Unrealized appreciation on forward currency exchange contracts | | | 275,694 | |
Receivable for variation margin on futures | | | 54,224 | |
Unaffiliated dividends receivable | | | 39,668 | |
Receivable for investment securities sold | | | 10,249 | |
Affiliated dividends receivable | | | 319 | |
| | | | |
Total assets | | | 90,374,093 | |
| | | | |
LIABILITIES | |
Options written, at value (premiums received $112,146) | | | 41,517 | |
Unrealized depreciation on forward currency exchange contracts | | | 417,134 | |
Payable for investment securities purchased | | | 50,094 | |
Audit and tax fee payable | | | 45,263 | |
Advisory fee payable | | | 25,444 | |
Administrative fee payable | | | 20,475 | |
Payable for capital stock redeemed | | | 19,339 | |
Distribution fee payable | | | 18,904 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses | | | 27,839 | |
| | | | |
Total liabilities | | | 666,155 | |
| | | | |
NET ASSETS | | $ | 89,707,938 | |
| | | | |
COMPOSITION OF NET ASSETS | |
Capital stock, at par | | $ | 8,202 | |
Additional paid-in capital | | | 76,983,462 | |
Distributable earnings | | | 12,716,274 | |
| | | | |
| | $ | 89,707,938 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 12,119 | | | | 1,100 | | | $ | 11.02 | |
| | | |
| B | | $ | 89,695,819 | | | | 8,200,901 | | | $ | 10.94 | |
See notes to financial statements.
12
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers | | $ | 791,281 | |
Affiliated issuers | | | 67,562 | |
Interest(a) | | | (31,408 | ) |
Securities lending income | | | 7,987 | |
| | | | |
| | | 835,422 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 525,678 | |
Distribution fee—Class B | | | 219,003 | |
Transfer agency—Class B | | | 2,124 | |
Custody and accounting | | | 88,333 | |
Administrative | | | 74,080 | |
Audit and tax | | | 57,521 | |
Legal | | | 22,418 | |
Printing | | | 18,781 | |
Directors’ fees | | | 17,286 | |
Miscellaneous | | | 26,343 | |
| | | | |
Total expenses | | | 1,051,567 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (228,708 | ) |
| | | | |
Net expenses | | | 822,859 | |
| | | | |
Net investment income | | | 12,563 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 5,096,935 | |
Forward currency exchange contracts | | | (513,116 | ) |
Futures | | | (2,676,175 | ) |
Options written | | | (3,162,964 | ) |
Swaps | | | 189,651 | |
Swaptions written | | | (336,262 | ) |
Foreign currency transactions | | | 420,116 | |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | 2,503,142 | |
Forward currency exchange contracts | | | (19,582 | ) |
Futures | | | 288,233 | |
Options written | | | 58,817 | |
Swaps | | | 12,695 | |
Foreign currency denominated assets and liabilities | | | 14,685 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 1,876,175 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 1,888,738 | |
| | | | |
| (a) | | The negative interest income reflects coupon income adjusted for fluctuations in the inflation index related to inflation-indexed bonds and the amortization of premiums. |
See notes to financial statements.
13
| | |
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 12,563 | | | $ | 727,490 | |
Net realized gain (loss) on investment transactions and foreign currency transactions | | | (981,815 | ) | | | 3,587,136 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 2,857,990 | | | | 10,646,497 | |
| | | | | | | | |
Net increase in net assets from operations | | | 1,888,738 | | | | 14,961,123 | |
Distributions to Shareholders | | | | | | | | |
Class A | | | (565 | ) | | | (263 | ) |
Class B | | | (3,956,811 | ) | | | (1,823,657 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net decrease | | | (3,585,153 | ) | | | (6,913,088 | ) |
| | | | | | | | |
Total increase (decrease) | | | (5,653,791 | ) | | | 6,224,115 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 95,361,729 | | | | 89,137,614 | |
| | | | | | | | |
End of period | | $ | 89,707,938 | | | $ | 95,361,729 | |
| | | | | | | | |
See notes to financial statements.
14
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Global Risk Allocation—Moderate Portfolio (the “Portfolio”) is a series of AB Variable Products Series Fund, Inc. (the “Fund”). 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 is non-diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland as an open-end series investment company. The Fund offers 11 separately managed pools of assets which have differing investment objectives and policies. The Portfolio offers Class A and Class B shares. At December 31, 2020 the Adviser was the sole shareholder of Class A 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 Portfolio’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, 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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.
15
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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.
Options are valued using market-based inputs to models, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency, where such inputs and models are available. Alternatively, the values may be obtained through unobservable management determined inputs and/or management’s proprietary models. Where models are used, the selection of a particular model to value an option depends upon the contractual terms of, and specific risks inherent in, the option as well as the availability of pricing information in the market. Valuation models require a variety of inputs, including contractual terms, market prices, measures of volatility and correlations of such inputs. Exchange traded options generally will be classified as Level 2. For options that do not trade on exchange but trade in liquid markets, inputs can generally be verified and model selection does not involve significant management judgment. Options are classified within Level 2 on the fair value hierarchy when all of the significant inputs can be corroborated to market evidence. Otherwise such instruments 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
16
| | |
| |
| | | AB Variable Products Series Fund |
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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | |
Investment Companies | | $ | 42,010,198 | | | $ | –0 | – | | $ | –0 | – | | $ | 42,010,198 | |
Inflation-Linked Securities | | | –0 | – | | | 11,941,667 | | | | –0 | – | | | 11,941,667 | |
Options Purchased—Puts | | | –0 | – | | | 108,971 | | | | –0 | – | | | 108,971 | |
Short-Term Investments: | | | | | | | | | | | | | | | | |
Governments—Treasuries | | | –0 | – | | | 17,937,534 | | | | –0 | – | | | 17,937,534 | |
Investment Companies | | | 12,179,518 | | | | –0 | – | | | –0 | – | | | 12,179,518 | |
U.S. Treasury Bills | | | –0 | – | | | 2,633,932 | | | | –0 | – | | | 2,633,932 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 54,189,716 | | | | 32,622,104 | | | | –0 | – | | | 86,811,820 | |
Other Financial Instruments(a): | | | | | | | | | | | | | | | | |
Assets: | |
Futures | | | 279,064 | | | | 28,678 | | | | –0 | – | | | 307,742 | (b) |
Forward Currency Exchange Contracts | | | –0 | – | | | 275,694 | | | | –0 | – | | | 275,694 | |
Liabilities: | |
Futures | | | (71,416 | ) | | | (2,509 | ) | | | –0 | – | | | (73,925 | )(b) |
Forward Currency Exchange Contracts | | | –0 | – | | | (417,134 | ) | | | –0 | – | | | (417,134 | ) |
Put Options Written | | | –0 | – | | | (41,517 | ) | | | –0 | – | | | (41,517 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 54,397,364 | | | $ | 32,465,316 | | | $ | –0 | – | | $ | 86,862,680 | |
| | | | | | | | | | | | | | | | |
| (a) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
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, 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.
17
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 .60% of the first $100 million, .45% of the excess over $100 million up to $1 billion and .40% of the excess over $1 billion of the Portfolio’s average daily net assets. The fee is accrued daily and paid monthly. Prior to January 1, 2020, the Portfolio paid the Adviser an advisory fee at an annual rate of .60% 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 (excluding interest expense, taxes, extraordinary expenses, expenses associated with securities sold short, and brokerage commissions and other transaction costs), inclusive of the Portfolio’s proportionate share of fees and expenses of registered investment companies or series thereof in which the Portfolio invests (“Acquired Fund Expenses”) on an annual basis (the “Expense Caps”) to .75% and 1.00% of daily average net assets for Class A and Class B, respectively. The Expense Caps may not be terminated by the Adviser before May 1, 2021. For the year ended December 31, 2020, the reimbursements/waivers, exclusive of Acquired Fund Expenses, amounted to $174,167. For the year ended December 31, 2020, such waiver for Acquired Fund Expenses for both affiliated and unaffiliated underlying portfolios amounted to $18,184 and $35,851, respectively.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
AB Government Money Market Portfolio | | $ | 15,287 | | | $ | 45,229 | | | $ | 48,336 | | | $ | 12,180 | | | $ | 68 | |
AB Government Money Market Portfolio* | | | 1,040 | | | | 51,991 | | | | 53,031 | | | | 0 | | | | 4 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 12,180 | | | $ | 72 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
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, 2020, the reimbursement for such services amounted to $74,080.
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 $1,636 for the year ended December 31, 2020.
18
| | |
| |
| | | AB Variable Products Series Fund |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 17,601,910 | | | $ | 37,750,325 | |
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 | | $ | 73,473,764 | |
| | | | |
Gross unrealized appreciation | | $ | 14,342,093 | |
Gross unrealized depreciation | | | (941,444 | ) |
| | | | |
Net unrealized appreciation | | $ | 13,400,649 | |
| | | | |
19
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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 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 cash collateral 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, 2020, 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 forward currency exchange contracts. 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, 2020, 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.
20
| | |
| |
| | | AB Variable Products Series Fund |
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. If a put or call option purchased by the Portfolio were permitted to expire without being sold or exercised, its premium would represent a loss to the Portfolio. 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. The Portfolio’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. 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. The Portfolio’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended December 31, 2020, the Portfolio held purchased options for hedging and non-hedging purposes. During the year ended December 31, 2020, the Portfolio held purchased swaptions for hedging and non-hedging purposes.
During the year ended December 31, 2020, the Portfolio held written options for hedging and non-hedging purposes. During the year ended December 31, 2020, the Portfolio held written swaptions for hedging and non-hedging purposes.
The Portfolio may enter into swaps to hedge its exposure to interest rates, credit risk, equity markets or currencies. The Portfolio may also enter into swaps for non-hedging purposes as a means of gaining market exposures, 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.
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.
21
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 clearinghouse on which the transaction is effected. Such amount is shown as cash collateral 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 centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared 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.
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 for OTC swaps 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.
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, 2020, the Portfolio held interest rate swaps for hedging and non-hedging purposes.
Variance Swaps:
The Portfolio may enter into variance swaps to hedge equity market risk or adjust exposure to the equity markets. Variance swaps are contracts in which two parties agree to exchange cash payments based on the difference between the stated level of variance and the actual variance realized on underlying asset(s) or index(es). Actual “variance” as used here is defined as the sum of the square of the returns on the reference asset(s) or index(es) (which in effect is a measure of its “volatility”) over the length of the contract term. So the parties to a variance swap can be said to exchange actual volatility for a contractually stated rate of volatility.
22
| | |
| |
| | | AB Variable Products Series Fund |
During the year ended December 31, 2020, the Portfolio held variance swaps for hedging and non-hedging purposes.
The Portfolio typically enters into International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreement”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 futures | | $ | 105,507 | * | | Receivable/Payable for variation margin on futures | | $ | 25,595 | * |
| | | | |
Equity contracts | | Receivable/Payable for variation margin on futures | | | 202,235 | * | | Receivable/Payable for variation margin on futures | | | 48,330 | * |
| | | | |
Foreign currency contracts | | Unrealized appreciation on forward currency exchange contracts | | | 275,694 | | | Unrealized depreciation on forward currency exchange contracts | | | 417,134 | |
| | | | |
Equity contracts | | Investments in securities, at value | | | 108,971 | | | | | | | |
| | | | |
Equity contracts | | | | | | | | Options written, at value | | | 41,517 | |
| | | | | | | | | | | | |
Total | | | | $ | 692,407 | | | | | $ | 532,576 | |
| | | | | | | | | | | | |
| * | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives Within Statement of Operations | | 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 | | $ | 458,562 | | | $ | 208,753 | |
| | | |
Equity contracts | | Net realized gain (loss) on futures; Net change in unrealized appreciation/depreciation of futures | | | (3,134,737 | ) | | | 79,480 | |
| | | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | | (513,116 | ) | | | (19,582 | ) |
| | | |
Equity contracts | | Net realized gain (loss) on investment transactions; Net change in unrealized appreciation/depreciation of investments | | | 680,952 | | | | (119,350 | ) |
| | | |
Equity contracts | | Net realized gain (loss) on options written; Net change in unrealized appreciation/depreciation of options written | | | (3,162,964 | ) | | | 58,817 | |
23
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives Within Statement of Operations | | Realized Gain or
(Loss) on
Derivatives | | | Change in Unrealized
Appreciation or
(Depreciation) | |
| | | |
Interest rate contracts | | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | | $ | (336,262 | ) | | $ | –0 | – |
| | | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (45,621 | ) | | | –0 | – |
| | | |
Foreign exchange contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | 235,272 | | | | 12,695 | |
| | | | | | | | | | |
Total | | | | $ | (5,817,914 | ) | | $ | 220,813 | |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Futures: | | | | |
Average notional amount of buy contracts | | $ | 36,578,291 | |
Average notional amount of sale contracts | | $ | 7,424,781 | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 6,298,109 | |
Average principal amount of sale contracts | | $ | 31,640,762 | |
Purchased Options: | | | | |
Average notional amount | | $ | 16,537,175 | |
Purchased Swaptions: | | | | |
Average notional amount | | $ | 7,161,000 | (a) |
Options Written: | | | | |
Average notional amount | | $ | 16,466,236 | |
Swaptions Written: | | | | |
Average notional amount | | $ | 16,709,000 | (a) |
Centrally Cleared Interest Rate Swaps: | | | | |
Average notional amount | | $ | 9,909,286 | (b) |
Variance Swaps: | | | | |
Average notional amount | | $ | 358,581 | (c) |
| (a) | | Positions were open for three months during the year. |
| (b) | | Positions were open for less than one month during the year. |
| (c) | | 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 OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative
Assets Subject
to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Received* | | | Security Collateral
Received* | | | Net Amount of
Derivative
Assets | |
Barclays Bank PLC | | $ | 63,589 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 63,589 | |
Citibank, NA | | | 24,252 | | | | (24,252 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley Capital Services, Inc. | | | 722 | | | | (722 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Standard Chartered Bank | | | 37,988 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 37,988 | |
State Street Bank & Trust Co. | | | 149,143 | | | | (149,143 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 275,694 | | | $ | (174,117 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 101,577 | ^ |
| | | | | | | | | | | | | | | | | | | | |
24
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative
Liabilities Subject
to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Pledged* | | | Security Collateral
Pledged* | | | Net Amount of
Derivative
Liabilities | |
Citibank, NA | | $ | 44,061 | | | $ | (24,252 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 19,809 | |
HSBC Bank USA | | | 87,643 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 87,643 | |
Morgan Stanley Capital Services, Inc. | | | 3,363 | | | | (722 | ) | | | –0 | – | | | –0 | – | | | 2,641 | |
State Street Bank & Trust Co. | | | 251,243 | | | | (149,143 | ) | | | –0 | – | | | –0 | – | | | 102,100 | |
UBS AG | | | 30,824 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 30,824 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 417,134 | | | $ | (174,117 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 243,017 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in AB Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and AB Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from AB Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in AB Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of AB Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
25
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value
of Securities on Loan* | | | Cash
Collateral* | | | Market Value
of Non-Cash
Collateral* | | | Income from
Borrowers | | | AB Government Money
Market Portfolio | |
| | Income Earned | | | Advisory Fee
Waived | |
| $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 3,604 | | | $ | 4,383 | | | $ | 506 | |
| * | | As of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class B | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 618,184 | | | | 655,805 | | | | | | | $ | 6,428,418 | | | $ | 6,900,710 | |
Shares issued in reinvestment of dividends and distributions | | | 383,737 | | | | 173,003 | | | | | | | | 3,956,326 | | | | 1,823,446 | |
Shares redeemed | | | (1,324,181 | ) | | | (1,475,145 | ) | | | | | | | (13,969,897 | ) | | | (15,637,244 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (322,260 | ) | | | (646,337 | ) | | | | | | $ | (3,585,153 | ) | | $ | (6,913,088 | ) |
| | | | | | | | | | | | | | | | | | | | |
There were no transactions in capital shares for Class A for the year ended December 31, 2020 and the year ended December 31, 2019.
At December 31, 2020, a shareholder of the Portfolio owned 97% of the Portfolio’s outstanding shares. Significant transactions by such shareholder, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
Market Risk—The value of the Portfolio’s investments 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
Allocation Risk—The allocation of investments among asset classes may have a significant effect on the Portfolio’s net asset value, or NAV, when the asset classes in which the Portfolio has invested more heavily perform worse than the asset classes invested in less heavily.
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing 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 and accrued interest. 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.
High Yield Securities Risk—Investments in fixed-income securities with ratings below investment grade (commonly known as “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 and negative perceptions of the junk bond market generally, and may be more difficult to trade than other types of securities.
26
| | |
| |
| | | AB Variable Products Series Fund |
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 more difficult to trade 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.
Investment in Other Investment Companies Risk—As with other investments, investments in other investment companies, including ETFs, are subject to market and selection risk. In addition, Contractholders of the Portfolio bear both their proportionate share of expenses in the Portfolio (including advisory fees) and, indirectly, the expenses of the investment companies in which the Portfolio invests.
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 on the statement of assets and liabilities.
Leverage Risk—When the Portfolio borrows money or otherwise leverages its investments, its performance 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 or by borrowing money. The use of other types of derivative instruments by the Portfolio, such as 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.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of illiquid investments risk may include low trading volumes and large positions. Foreign fixed-income securities may have more illiquid investments risk because secondary trading markets for these securities may be smaller and less well developed and the securities may trade less frequently. Illiquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
Non-Diversification Risk—The Portfolio may have more risk because it is “non-diversified”, meaning that it can invest more of its assets in a smaller number of issuers. Accordingly, 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, or NAV.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
27
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 1,703,669 | | | $ | 1,823,920 | |
Net long-term capital gains | | | 2,253,707 | | | | –0 | – |
| | | | | | | | |
Total taxable distributions | | $ | 3,957,376 | | | $ | 1,823,920 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Accumulated capital losses | | $ | (715,878 | )(a) |
Other losses | | | (77 | )(b) |
Unrealized appreciation/(depreciation) | | | 13,432,229 | (c) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 12,716,274 | |
| | | | |
| (a) | | As of December 31, 2020, the Portfolio had a net capital loss carryforward of $715,878. |
| (b) | | As of December 31, 2020, the cumulative deferred loss on straddles was $77. |
| (c) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of Treasury inflation-protected securities, and the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio had a net short-term capital loss carryforward of $715,878, which may be carried forward for an indefinite period.
During the current fiscal year, permanent differences primarily due to the disallowance of a net operating loss and taxable overdistributions resulted in a net increase in distributable earnings 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.
28
| | |
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $11.27 | | | | $9.79 | | | | $10.83 | | | | $9.78 | | | | $9.40 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .03 | | | | .11 | | | | .09 | | | | .06 | | | | .04 | |
Net realized and unrealized gain (loss) on investment transactions and foreign currency transactions | | | .23 | | | | 1.61 | | | | (.55 | ) | | | 1.09 | | | | .37 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .26 | | | | 1.72 | | | | (.46 | ) | | | 1.15 | | | | .41 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.17 | ) | | | (.24 | ) | | | –0 | – | | | (.05 | ) | | | (.03 | ) |
Distributions from net realized gain on investment transactions | | | (.34 | ) | | | –0 | – | | | (.58 | ) | | | (.05 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.51 | ) | | | (.24 | ) | | | (.58 | ) | | | (.10 | ) | | | (.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $11.02 | | | | $11.27 | | | | $9.79 | | | | $10.83 | | | | $9.78 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d) | | | 2.72 | % | | | 17.61 | % | | | (4.62 | )% | | | 11.87 | % | | | 4.39 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $12 | | | | $12 | | | | $11 | | | | $12 | | | | $11 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/
reimbursements (e)(f)‡ | | | .69 | % | | | .68 | % | | | .67 | % | | | .63 | % | | | .63 | % |
Expenses, before waivers/
reimbursements (e)(f)‡ | | | .95 | % | | | .95 | % | | | .92 | % | | | .94 | % | | | 1.08 | % |
Net investment income (b) | | | .27 | % | | | 1.05 | % | | | .88 | % | | | .55 | % | | | .46 | % |
Portfolio turnover rate | | | 31 | % | | | 29 | % | | | 67 | % | | | 59 | % | | | 79 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .06 | % | | | .07 | % | | | .08 | % | | | .11 | % | | | .12 | % |
See footnote summary on page 31.
29
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| FINANCIAL HIGHLIGHTS |
| |
| (continued) | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | ClASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $11.19 | | | | $9.72 | | | | $10.78 | | | | $9.75 | | | | $9.39 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .00 | (c) | | | .08 | | | | .07 | | | | .03 | | | | .02 | |
Net realized and unrealized gain (loss) on investment transactions and foreign currency transactions | | | .23 | | | | 1.60 | | | | (.55 | ) | | | 1.09 | | | | .37 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .23 | | | | 1.68 | | | | (.48 | ) | | | 1.12 | | | | .39 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.14 | ) | | | (.21 | ) | | | –0 | – | | | (.04 | ) | | | (.03 | ) |
Distributions from net realized gain on investment transactions | | | (.34 | ) | | | –0 | – | | | (.58 | ) | | | (.05 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.48 | ) | | | (.21 | ) | | | (.58 | ) | | | (.09 | ) | | | (.03 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.94 | | | | $11.19 | | | | $9.72 | | | | $10.78 | | | | $9.75 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d) | | | 2.45 | % | | | 17.32 | % | | | (4.84 | )% | | | 11.50 | % | | | 4.24 | % |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $89,696 | | | | $95,350 | | | | $89,127 | | | | $98,502 | | | | $79,298 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/
reimbursements (e)(f)‡ | | | .94 | % | | | .94 | % | | | .92 | % | | | .89 | % | | | .88 | % |
Expenses, before waivers/
reimbursements (e)(f)‡ | | | 1.20 | % | | | 1.20 | % | | | 1.16 | % | | | 1.17 | % | | | 1.33 | % |
Net investment income (b) | | | .01 | % | | | .78 | % | | | .64 | % | | | .31 | % | | | .24 | % |
Portfolio turnover rate | | | 31 | % | | | 29 | % | | | 67 | % | | | 59 | % | | | 79 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .06 | % | | | .07 | % | | | .08 | % | | | .11 | % | | | .12 | % |
See footnote summary on page 31.
30
| | |
| |
| | | AB Variable Products Series Fund |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Amount is less than $.005. |
| (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. |
| (e) | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of affiliated/unaffiliated acquired fund fees and expenses, and for the year ended December 31, 2020, December 31, 2019, December 31, 2018 December 31, 2017 and December 31, 2016, such waiver amounted to .06%, .07%, .08%, .11% and .12%, respectively. |
| (f) | | The expense ratios presented below exclude interest/bank overdraft expense: |
| | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | N/A | | | | .68 | % | | | N/A | | | | N/A | | | | N/A | |
Before waivers/reimbursements | | | N/A | | | | .95 | % | | | N/A | | | | N/A | | | | N/A | |
Class B | | | | | | | | | | | | | | | | | | | | |
Net of waivers/reimbursements | | | N/A | | | | .94 | % | | | N/A | | | | N/A | | | | N/A | |
Before waivers/reimbursements | | | N/A | | | | 1.20 | % | | | N/A | | | | N/A | | | | N/A | |
See notes to financial statements.
31
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Global Risk Allocation-Moderate Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Global Risk Allocation—Moderate Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
32
| | |
| | | |
| | | |
| |
| 2020 FEDERAL TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 33.85% of dividends paid qualify for the dividends received deduction. The Portfolio designates $2,253,707 of dividends paid as long-term capital gain dividends.
33
| | |
| | |
| GLOBAL RISK ALLOCATION— | | |
| |
| MODERATE PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer |
| | Jeanette W. Loeb(1) |
| | Carol C. McMullen(1) |
| | Garry L. Moody(1) |
| | Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Daniel J. Loewy(2), Vice President Leon Zhu(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 | | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 5 Times Square New York, NY 10036 |
| | |
PRINCIPAL UNDERWRITER AllianceBernstein Investments, Inc. 1345 Avenue of the Americas New York, NY 10105 | | LEGAL COUNSEL Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 |
| | |
TRANSFER AGENT AllianceBernstein Investor Services, Inc. P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (800) 221-5672 | | |
| (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 Fund are made by the Adviser’s Quantitative Investment Team. Messrs. Loewy and Zhu are the investment professionals with the most significant responsibility for the day-to-day management of the Fund’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
34
| | |
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| MANAGEMENT OF THE FUND | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER
PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 79 (2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
Jorge A. Bermudez,## 69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
35
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER
PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin, ## 72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
Jeanette W. Loeb,## 68 (2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
36
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER
PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Carol C. McMullen, ## 65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody, ## 68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody, and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees of the AB Funds since 2008. | | | 74 | | | None |
| | | | | | | | |
37
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER
PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner, ## 81 (2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
38
| | |
| |
| | | AB Variable Products Series Fund |
Officer Information
| | | | |
Robert M. Keith^ 60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Daniel J. Loewy 46 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer and Head of Multi-Asset Solutions and Chief Investment Officer for Dynamic Asset Allocation. |
| | | | |
Leon Zhu
53 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Emilie D. Wrapp
65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes
44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo
61 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke
60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto
56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | The address for each of the Fund’s Officers is 1345 Avenue of the Americas, New York, NY 10105. |
| ** | | The Adviser, ABI and ABIS are affiliates of the Fund. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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 AB at (800) 227-4618, or visit www.abfunds.com, for a free prospectus or SAI. |
39
| | |
| | |
| |
GLOBAL RISK ALLOCATION—
MODERATE PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
40
| | |
| | |
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Global Risk Allocation—Moderate Portfolio (the “Fund”) at a meeting held by video conference on August 4-5, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the
41
| | |
|
| GLOBAL RISK ALLOCATION—MODERATE PORTFOLIO |
| CONTINUANCE DISCLOSURE |
| |
| (continued) | | AB Variable Products Series Fund |
Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for 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 Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in 2019. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund in 2018 was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Adviser’s recent unprofitability to the Adviser would be exacerbated without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3- and 5-year periods ended May 31, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the
42
| | |
| |
| | | AB Variable Products Series Fund |
Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund invests 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, and that the Adviser had provided, and they had reviewed, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund is for services that are in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Class A Shares of the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
43
VPS-GRA-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS
SERIES FUND, INC.
| + | | GLOBAL THEMATIC GROWTH PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| GLOBAL THEMATIC GROWTH PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Global Thematic Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
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. 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 its global fundamental research capabilities, the Adviser seeks to identify long-term secular growth trends that will affect multiple industries. The Adviser will assess the effects of these trends on entire industries and on individual companies. Through this process, the Adviser intends to identify key investment themes, which will be the focus of the Portfolio’s investments and which are expected to change over time based on the Adviser’s research.
In addition to this “top-down” thematic approach, the Adviser will also use a “bottom-up” analysis of individual companies that focuses on prospective earnings growth, valuation and quality of company management. The Adviser normally considers a large universe of mid- to large-capitalization companies worldwide for investment.
The Portfolio invests in securities issued by US and non-US 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-US 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 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 contracts, options on futures contracts, 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, 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 World Index (“MSCI ACWI”) (net), for the one-, five- and 10-year periods ended December 31, 2020.
All share classes of the Portfolio outperformed the benchmark for the annual period. Stock selection in all sectors was positive; selection within the technology and health-care sectors contributed most, relative to the benchmark. In terms of sector allocation, an underweight to energy and an
1
| | |
| |
| | | AB Variable Products Series Fund |
overweight to technology contributed, while underweights to consumer discretionary and communication services detracted. Country selection (a result of bottom-up security analysis driven by fundamental research) was negative; an underweight to the US detracted most but was partially offset by an underweight to the UK.
The Portfolio used derivatives in the form of currency forwards for hedging purposes, which detracted from absolute returns for the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio’s exposures remain focused on secular growth themes, particularly those promoting social and environmental sustainability. This has helped the Portfolio’s Senior Investment Management Team (the “Team”) to identify companies with strong competitive advantages and high returns on invested capital that the Team believes are more likely to sustain higher-than-average growth over the long term. The Team believes organic sales and earnings growth will be a key driver of returns going forward. The Portfolio is positioned particularly well in this regard.
2
| | |
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The MSCI ACWI is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI ACWI (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets. 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. Net returns reflect the reinvestment of dividends after deduction of non-US withholding tax. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, may underperform the market generally.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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, and because these investments may be 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 mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in mid-capitalization companies may have additional risks because these companies may have limited product lines, markets or financial resources.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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.
(Disclosures, Risks and Note About Historical Performance continued on next page)
3
| | |
| | |
| DISCLOSURES AND RISKS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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) 227 4618. 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.
4
| | |
|
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARK | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Global Thematic Growth Portfolio Class A | | | 39.41% | | | | 17.32% | | | | 9.95% | |
| | | |
| Global Thematic Growth Portfolio Class B | | | 39.08% | | | | 17.03% | | | | 9.67% | |
| | | |
| MSCI ACWI (net) | | | 16.25% | | | | 12.26% | | | | 9.13% | |
1 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 1.04% and 1.29% 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 0.99% and 1.24% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Global Thematic Growth Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmark. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on pages 3-4.
5
| | |
|
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | | | Total
Expenses Paid
During Period+ | | | Total
Annualized
Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,306.80 | | | $ | 5.33 | | | | 0.92 | % | | $ | 5.39 | | | | 0.93 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.51 | | | $ | 4.67 | | | | 0.92 | % | | $ | 4.72 | | | | 0.93 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,305.30 | | | $ | 6.78 | | | | 1.17 | % | | $ | 6.84 | | | | 1.18 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.25 | | | $ | 5.94 | | | | 1.17 | % | | $ | 5.99 | | | | 1.18 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| + | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
6
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Flex Ltd. | | $ | 5,350,848 | | | | 2.9 | % |
Infineon Technologies AG | | | 5,187,158 | | | | 2.8 | |
Koninklijke Philips NV | | | 4,658,464 | | | | 2.5 | |
Vestas Wind Systems A/S | | | 4,646,631 | | | | 2.5 | |
Xylem, Inc./NY | | | 4,071,600 | | | | 2.2 | |
Aptiv PLC | | | 4,023,485 | | | | 2.2 | |
MSCI, Inc.—Class A | | | 4,005,374 | | | | 2.2 | |
NIKE, Inc.—Class B | | | 3,995,113 | | | | 2.2 | |
Bio-Rad Laboratories, Inc.—Class A | | | 3,969,821 | | | | 2.1 | |
Chr Hansen Holding A/S | | | 3,945,854 | | | | 2.1 | |
| | | | | | | | | |
| | | $ | 43,854,348 | | | | 23.7 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Information Technology | | $ | 47,950,697 | | | | 25.9 | % |
Health Care | | | 41,054,093 | | | | 22.2 | |
Industrials | | | 33,559,882 | | | | 18.1 | |
Financials | | | 21,236,704 | | | | 11.5 | |
Consumer Discretionary | | | 11,400,700 | | | | 6.2 | |
Materials | | | 7,338,846 | | | | 4.0 | |
Utilities | | | 5,535,378 | | | | 3.0 | |
Consumer Staples | | | 5,278,829 | | | | 2.8 | |
Communication Services | | | 2,885,346 | | | | 1.6 | |
Short-Term Investments | | | 8,794,504 | | | | 4.7 | |
| | | | | | | | | |
Total Investments | | $ | 185,034,979 | | | | 100.0 | % |
| 2 | | The Portfolio’s sector breakdown is expressed as a percentage of total investments 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). |
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
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO | | |
| COUNTRY BREAKDOWN1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
United States | | $ | 96,229,602 | | | | 52.0 | % |
Netherlands | | | 14,068,652 | | | | 7.6 | |
Denmark | | | 8,592,485 | | | | 4.7 | |
Switzerland | | | 7,934,056 | | | | 4.3 | |
Germany | | | 7,619,779 | | | | 4.1 | |
India | | | 7,482,876 | | | | 4.0 | |
France | | | 6,551,364 | | | | 3.5 | |
Ireland | | | 6,439,401 | | | | 3.5 | |
Japan | | | 5,989,330 | | | | 3.2 | |
Austria | | | 3,625,063 | | | | 2.0 | |
Norway | | | 3,581,920 | | | | 1.9 | |
China | | | 2,885,346 | | | | 1.6 | |
Hong Kong | | | 2,719,942 | | | | 1.5 | |
United Kingdom | | | 2,520,659 | | | | 1.4 | |
Short-Term Investments | | | 8,794,504 | | | | 4.7 | |
| | | | | | | | | |
Total Investments | | $ | 185,034,979 | | | | 100.0 | % |
| 1 | | All data are as of December 31, 2020. The Portfolio’s country breakdown is expressed as a percentage of total investments and may vary over time. |
8
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–95.1% | | | | | |
INFORMATION TECHNOLOGY–25.9% | | | | | | | | |
COMMUNICATIONS
EQUIPMENT–2.4% | | | | | | | | |
Calix, Inc.(a) | | | 36,348 | | | $ | 1,081,716 | |
Lumentum Holdings, Inc.(a) | | | 35,695 | | | | 3,383,886 | |
| | | | | | | | |
| | | | | | | 4,465,602 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS–4.8% | | | | | | | | |
Flex Ltd.(a) | | | 297,600 | | | | 5,350,848 | |
Keyence Corp. | | | 6,100 | | | | 3,431,351 | |
| | | | | | | | |
| | | | | | | 8,782,199 | |
| | | | | | | | |
IT SERVICES–5.6% | |
Adyen NV(a)(b) | | | 1,325 | | | | 3,078,691 | |
Square, Inc.–Class A(a) | | | 11,779 | | | | 2,563,582 | |
Twilio, Inc.–Class A(a) | | | 5,610 | | | | 1,898,985 | |
Visa, Inc.–Class A | | | 13,190 | | | | 2,885,049 | |
| | | | | | | | |
| | | | | | | 10,426,307 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–4.4% | | | | | | | | |
Infineon Technologies AG | | | 135,830 | | | | 5,187,158 | |
NXP Semiconductors NV | | | 18,480 | | | | 2,938,505 | |
| | | | | | | | |
| | | | | | | 8,125,663 | |
| | | | | | | | |
SOFTWARE–6.8% | |
Dassault Systemes SE | | | 16,090 | | | | 3,263,365 | |
Microsoft Corp. | | | 14,540 | | | | 3,233,987 | |
Proofpoint, Inc.(a) | | | 22,201 | | | | 3,028,439 | |
Zendesk, Inc.(a) | | | 21,620 | | | | 3,094,254 | |
| | | | | | | | |
| | | | | | | 12,620,045 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–1.9% | | | | | | | | |
Apple, Inc. | | | 26,610 | | | | 3,530,881 | |
| | | | | | | | |
| | | | | | | 47,950,697 | |
| | | | | | | | |
HEALTH CARE–22.1% | | | | | | | | |
BIOTECHNOLOGY–1.3% | |
Abcam PLC | | | 118,920 | | | | 2,520,659 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT &
SUPPLIES–8.6% | | | | | | | | |
Alcon, Inc.(a) | | | 41,710 | | | | 2,769,381 | |
Danaher Corp. | | | 14,450 | | | | 3,209,923 | |
Koninklijke Philips NV(a) | | | 86,480 | | | | 4,658,464 | |
STERIS PLC | | | 18,201 | | | | 3,449,818 | |
West Pharmaceutical Services, Inc. | | | 6,640 | | | | 1,881,178 | |
| | | | | | | | |
| | | | | | | 15,968,764 | |
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
HEALTH CARE PROVIDERS &
SERVICES–4.0% | | | | | | | | |
Apollo Hospitals Enterprise Ltd. | | | 117,027 | | | $ | 3,850,636 | |
Laboratory Corp. of America Holdings(a) | | | 17,431 | | | | 3,548,080 | |
| | | | | | | | |
| | | | | | | 7,398,716 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–8.2% | | | | | | | | |
Bio-Rad Laboratories, Inc.–Class A(a) | | | 6,810 | | | | 3,969,821 | |
Bruker Corp. | | | 65,170 | | | | 3,527,652 | |
Gerresheimer AG | | | 22,558 | | | | 2,432,621 | |
ICON PLC(a) | | | 17,420 | | | | 3,396,552 | |
Tecan Group AG | | | 3,750 | | | | 1,839,308 | |
| | | | | | | | |
| | | | | | | 15,165,954 | |
| | | | | | | | |
| | | | | | | 41,054,093 | |
| | | | | | | | |
INDUSTRIALS–18.1% | | | | | | | | |
AEROSPACE &
DEFENSE–1.7% | | | | | | | | |
Hexcel Corp. | | | 66,090 | | | | 3,204,704 | |
| | | | | | | | |
BUILDING PRODUCTS–2.0% | | | | | | | | |
Trex Co., Inc.(a) | | | 43,370 | | | | 3,630,937 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–4.8% | | | | | | | | |
Tetra Tech, Inc. | | | 18,980 | | | | 2,197,504 | |
TOMRA Systems ASA | | | 72,810 | | | | 3,581,920 | |
Waste Management, Inc. | | | 27,010 | | | | 3,185,289 | |
| | | | | | | | |
| | | | | | | 8,964,713 | |
| | | | | | | | |
ELECTRICAL
EQUIPMENT–6.0% | | | | | | | | |
Rockwell Automation, Inc. | | | 12,740 | | | | 3,195,319 | |
Schneider Electric SE | | | 22,750 | | | | 3,287,999 | |
Vestas Wind Systems A/S | | | 19,670 | | | | 4,646,631 | |
| | | | | | | | |
| | | | | | | 11,129,949 | |
| | | | | | | | |
MACHINERY–2.2% | |
Xylem, Inc./NY | | | 40,000 | | | | 4,071,600 | |
| | | | | | | | |
PROFESSIONAL
SERVICES–1.4% | | | | | | | | |
Recruit Holdings Co., Ltd. | | | 60,900 | | | | 2,557,979 | |
| | | | | | | | |
| | | | | | | 33,559,882 | |
| | | | | | | | |
FINANCIALS–11.5% | | | | | | | | |
BANKS–6.0% | |
Erste Group Bank AG(a) | | | 119,000 | | | | 3,625,063 | |
HDFC Bank Ltd.(a) | | | 184,135 | | | | 3,632,240 | |
SVB Financial Group(a) | | | 10,130 | | | | 3,928,718 | |
| | | | | | | | |
| | | | | | | 11,186,021 | |
| | | | | | | | |
CAPITAL MARKETS–4.0% | |
MSCI, Inc.–Class A | | | 8,970 | | | | 4,005,374 | |
Partners Group Holding AG | | | 2,830 | | | | 3,325,367 | |
| | | | | | | | |
| | | | | | | 7,330,741 | |
| | | | | | | | |
9
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INSURANCE–1.5% | |
AIA Group Ltd. | | | 223,200 | | | $ | 2,719,942 | |
| | | | | | | | |
| | | | | | | 21,236,704 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–6.1% | | | | | | | | |
AUTO COMPONENTS–2.2% | |
Aptiv PLC | | | 30,881 | | | | 4,023,485 | |
| | | | | | | | |
HOUSEHOLD
DURABLES–1.8% | | | | | | | | |
TopBuild Corp.(a) | | | 18,373 | | | | 3,382,102 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–2.1% | | | | | | | | |
NIKE, Inc.–Class B | | | 28,240 | | | | 3,995,113 | |
| | | | | | | | |
| | | | | | | 11,400,700 | |
| | | | | | | | |
MATERIALS–4.0% | | | | | | | | |
CHEMICALS–4.0% | |
Chr Hansen Holding A/S(a) | | | 38,190 | | | | 3,945,854 | |
Koninklijke DSM NV | | | 19,730 | | | | 3,392,992 | |
| | | | | | | | |
| | | | | | | 7,338,846 | |
| | | | | | | | |
UTILITIES–3.0% | | | | | | | | |
ELECTRIC UTILITIES–1.8% | |
NextEra Energy, Inc. | | | 42,210 | | | | 3,256,502 | |
| | | | | | | | |
WATER UTILITIES–1.2% | |
American Water Works Co., Inc. | | | 14,849 | | | | 2,278,876 | |
| | | | | | | | |
| | | | | | | 5,535,378 | |
| | | | | | | | |
| Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
CONSUMER
STAPLES–2.8% | | | | | | | | |
FOOD PRODUCTS–1.6% | |
Kerry Group PLC–Class A | | | 20,950 | | | $ | 3,042,849 | |
| | | | | | | | |
HOUSEHOLD
PRODUCTS–1.2% | | | | | | | | |
Procter & Gamble Co. (The) | | | 16,070 | | | | 2,235,980 | |
| | | | | | | | |
| | | | | | | 5,278,829 | |
| | | | | | | | |
COMMUNICATION SERVICES–1.6% | | | | | | | | |
INTERACTIVE MEDIA & SERVICES–1.6% | | | | | | | | |
Tencent Holdings Ltd. | | | 40,100 | | | | 2,885,346 | |
| | | | | | | | |
Total Common Stocks
(cost $112,763,594) | | | | | | | 176,240,475 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–4.7% | | | | | | | | |
INVESTMENT
COMPANIES–4.7% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 0.03%(c)(d)(e)
(cost $8,794,504) | | | 8,794,504 | | | | 8,794,504 | |
| | | | | | | | |
TOTAL
INVESTMENTS–99.8%
(cost $121,558,098) | | | | | | | 185,034,979 | |
Other assets less
liabilities–0.2% | | | | | | | 343,208 | |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 185,378,187 | |
| | | | | | | | |
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 | | | NOK | | | | 10,598 | | | | USD | | | | 1,226 | | | | 01/15/2021 | | | $ | (10,425 | ) |
Bank of America, NA | | | USD | | | | 385 | | | | CNY | | | | 2,519 | | | | 02/10/2021 | | | | 671 | |
Bank of America, NA | | | USD | | | | 922 | | | | JPY | | | | 95,226 | | | | 02/26/2021 | | | | 867 | |
Bank of America, NA | | | USD | | | | 618 | | | | EUR | | | | 504 | | | | 03/15/2021 | | | | (1,627 | ) |
Barclays Bank PLC | | | INR | | | | 109,250 | | | | USD | | | | 1,472 | | | | 01/15/2021 | | | | (22,342 | ) |
Barclays Bank PLC | | | USD | | | | 889 | | | | JPY | | | | 93,086 | | | | 03/15/2021 | | | | 13,273 | |
BNP Paribas SA | | | USD | | | | 525 | | | | ZAR | | | | 7,927 | | | | 03/15/2021 | | | | 9,226 | |
Citibank, NA | | | BRL | | | | 5,081 | | | | USD | | | | 978 | | | | 01/05/2021 | | | | (471 | ) |
Citibank, NA | | | USD | | | | 954 | | | | BRL | | | | 5,081 | | | | 01/05/2021 | | | | 24,359 | |
Citibank, NA | | | USD | | | | 2,560 | | | | KRW | | | | 2,895,937 | | | | 01/14/2021 | | | | 101,501 | |
Citibank, NA | | | USD | | | | 2,520 | | | | TWD | | | | 70,687 | | | | 01/27/2021 | | | | 3,403 | |
Citibank, NA | | | USD | | | | 1,928 | | | | CNY | | | | 12,633 | | | | 02/10/2021 | | | | 6,342 | |
Citibank, NA | | | EUR | | | | 1,632 | | | | USD | | | | 1,931 | | | | 03/15/2021 | | | | (66,373 | ) |
Citibank, NA | | | USD | | | | 3,547 | | | | CAD | | | | 4,534 | | | | 03/15/2021 | | | | 15,969 | |
Citibank, NA | | | USD | | | | 563 | | | | EUR | | | | 459 | | | | 03/15/2021 | | | | (1,451 | ) |
Deutsche Bank AG | | | INR | | | | 229,312 | | | | USD | | | | 3,093 | | | | 01/15/2021 | | | | (43,815 | ) |
Deutsche Bank AG | | | USD | | | | 1,151 | | | | JPY | | | | 120,598 | | | | 03/15/2021 | | | | 18,309 | |
Goldman Sachs Bank USA | | | USD | | | | 294 | | | | KRW | | | | 326,231 | | | | 01/14/2021 | | | | 5,427 | |
10
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
Goldman Sachs Bank USA | | | USD | | | | 282 | | | | INR | | | | 20,838 | | | | 01/15/2021 | | | $ | 3,416 | |
Goldman Sachs Bank USA | | | USD | | | | 335 | | | | RUB | | | | 25,789 | | | | 01/22/2021 | | | | 13,671 | |
Goldman Sachs Bank USA | | | EUR | | | | 22,003 | | | | USD | | | | 26,725 | | | | 03/15/2021 | | | | (197,626) | |
Goldman Sachs Bank USA | | | USD | | | | 2,771 | | | | AUD | | | | 3,701 | | | | 03/15/2021 | | | | 84,383 | |
Goldman Sachs Bank USA | | | USD | | | | 425 | | | | CNY | | | | 2,826 | | | | 03/15/2021 | | | | 7,026 | |
Goldman Sachs Bank USA | | | USD | | | | 3,091 | | | | EUR | | | | 2,525 | | | | 03/15/2021 | | | | (1,677 | ) |
Goldman Sachs Bank USA | | | USD | | | | 1,346 | | | | SEK | | | | 11,370 | | | | 03/15/2021 | | | | 36,855 | |
Goldman Sachs Bank USA | | | EUR | | | | 633 | | | | USD | | | | 773 | | | | 03/17/2021 | | | | (1,204 | ) |
JPMorgan Chase Bank, NA | | | USD | | | | 273 | | | | TWD | | | | 7,595 | | | | 01/27/2021 | | | | (2,169 | ) |
JPMorgan Chase Bank, NA | | | USD | | | | 3,835 | | | | CNY | | | | 25,275 | | | | 03/15/2021 | | | | 26,641 | |
Morgan Stanley Capital Services, Inc. | | | HKD | | | | 4,685 | | | | USD | | | | 604 | | | | 03/15/2021 | | | | (107 | ) |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 799 | | | | CAD | | | | 1,044 | | | | 03/15/2021 | | | | 21,064 | |
Natwest Markets PLC | | | USD | | | | 2,261 | | | | GBP | | | | 1,680 | | | | 03/15/2021 | | | | 37,712 | |
Standard Chartered Bank | | | INR | | | | 25,267 | | | | USD | | | | 342 | | | | 01/15/2021 | | | | (3,908 | ) |
Standard Chartered Bank | | | USD | | | | 976 | | | | INR | | | | 73,324 | | | | 01/15/2021 | | | | 26,716 | |
Standard Chartered Bank | | | USD | | | | 300 | | | | RUB | | | | 22,192 | | | | 01/22/2021 | | | | (285 | ) |
Standard Chartered Bank | | | USD | | | | 2,283 | | | | JPY | | | | 237,552 | | | | 03/15/2021 | | | | 19,648 | |
State Street Bank & Trust Co. | | | INR | | | | 88,567 | | | | USD | | | | 1,193 | | | | 01/15/2021 | | | | (18,340 | ) |
State Street Bank & Trust Co. | | | USD | | | | 327 | | | | GBP | | | | 242 | | | | 01/21/2021 | | | | 4,100 | |
State Street Bank & Trust Co. | | | USD | | | | 966 | | | | BRL | | | | 5,081 | | | | 02/02/2021 | | | | 11,516 | |
State Street Bank & Trust Co. | | | USD | | | | 283 | | | | MXN | | | | 5,632 | | | | 02/25/2021 | | | | (1,743 | ) |
State Street Bank & Trust Co. | | | JPY | | | | 29,912 | | | | USD | | | | 290 | | | | 02/26/2021 | | | | 105 | |
State Street Bank & Trust Co. | | | USD | | | | 361 | | | | JPY | | | | 37,324 | | | | 02/26/2021 | | | | 763 | |
State Street Bank & Trust Co. | | | CHF | | | | 1,853 | | | | USD | | | | 2,050 | | | | 03/15/2021 | | | | (47,013 | ) |
State Street Bank & Trust Co. | | | EUR | | | | 1,706 | | | | USD | | | | 2,034 | | | | 03/15/2021 | | | | (53,773 | ) |
State Street Bank & Trust Co. | | | HKD | | | | 1,211 | | | | USD | | | | 156 | | | | 03/15/2021 | | | | (15 | ) |
State Street Bank & Trust Co. | | | NOK | | | | 9,066 | | | | USD | | | | 999 | | | | 03/15/2021 | | | | (58,091 | ) |
State Street Bank & Trust Co. | | | USD | | | | 312 | | | | AUD | | | | 427 | | | | 03/15/2021 | | | | 17,125 | |
State Street Bank & Trust Co. | | | USD | | | | 260 | | | | CAD | | | | 340 | | | | 03/15/2021 | | | | 7,131 | |
State Street Bank & Trust Co. | | | USD | | | | 561 | | | | CHF | | | | 495 | | | | 03/15/2021 | | | | (694 | ) |
State Street Bank & Trust Co. | | | USD | | | | 764 | | | | EUR | | | | 625 | | | | 03/15/2021 | | | | 1,008 | |
State Street Bank & Trust Co. | | | USD | | | | 963 | | | | GBP | | | | 730 | | | | 03/15/2021 | | | | 35,842 | |
State Street Bank & Trust Co. | | | USD | | | | 278 | | | | JPY | | | | 29,004 | | | | 03/15/2021 | | | | 3,004 | |
UBS AG | | | CHF | | | | 1,045 | | | | USD | | | | 1,180 | | | | 03/15/2021 | | | | (2,676 | ) |
UBS AG | | | USD | | | | 999 | | | | GBP | | | | 770 | | | | 03/15/2021 | | | | 54,886 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 76,134 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | Non-income producing security. |
| (b) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the market value of this security amounted to $3,078,691 or 1.7% of net assets. |
| (c) | | Affiliated investments. |
| (d) | | The rate shown represents the 7-day yield as of period end. |
| (e) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
11
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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
INR—Indian Rupee
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
NOK—Norwegian Krone
RUB—Russian Ruble
SEK—Swedish Krona
TWD—New Taiwan Dollar
USD—United States Dollar
ZAR—South African Rand
See notes to financial statements.
12
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $112,763,594) | | $ | 176,240,475 | |
Affiliated issuers (cost $8,794,504) | | | 8,794,504 | |
Foreign currencies, at value (cost $402,903) | | | 404,162 | |
Unrealized appreciation on forward currency exchange contracts | | | 611,959 | |
Unaffiliated dividends receivable | | | 95,733 | |
Receivable for investment securities sold and foreign currency transactions | | | 52,347 | |
Receivable for capital stock sold | | | 12,839 | |
Affiliated dividends receivable | | | 211 | |
| | | | |
Total assets | | | 186,212,230 | |
| | | | |
LIABILITIES | | | | |
Unrealized depreciation on forward currency exchange contracts | | | 535,825 | |
Advisory fee payable | | | 105,925 | |
Audit and tax fee payable | | | 50,511 | |
Payable for capital stock redeemed | | | 34,287 | |
Distribution fee payable | | | 26,025 | |
Administrative fee payable | | | 20,267 | |
Payable for investment securities purchased and foreign currency transactions | | | 11,391 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses | | | 49,666 | |
| | | | |
Total liabilities | | | 834,043 | |
| | | | |
NET ASSETS | | $ | 185,378,187 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 4,510 | |
Additional paid-in capital | | | 97,615,861 | |
Distributable earnings | | | 87,757,816 | |
| | | | |
| | $ | 185,378,187 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 58,315,717 | | | | 1,375,437 | | | $ | 42.40 | |
| | | |
| B | | $ | 127,062,470 | | | | 3,134,522 | | | $ | 40.54 | |
See notes to financial statements.
13
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $61,607) | | $ | 905,405 | |
Affiliated issuers | | | 33,181 | |
Securities lending income | | | 6,088 | |
| | | | |
| | | 944,674 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 1,085,910 | |
Distribution fee—Class B | | | 247,143 | |
Transfer agency—Class A | | | 2,019 | |
Transfer agency—Class B | | | 4,352 | |
Custody and accounting | | | 105,651 | |
Administrative | | | 75,347 | |
Audit and tax | | | 64,044 | |
Printing | | | 54,865 | |
Legal | | | 24,174 | |
Directors’ fees | | | 18,153 | |
Miscellaneous | | | 10,101 | |
| | | | |
Total expenses | | | 1,691,759 | |
Less: expenses waived and reimbursed by the Adviser (see Note B) | | | (81,168 | ) |
| | | | |
Net expenses | | | 1,610,591 | |
| | | | |
Net investment loss | | | (665,917 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 26,453,074 | |
Forward currency exchange contracts | | | (1,217,590 | ) |
Foreign currency transactions | | | (111,695 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments | | | 26,079,213 | |
Forward currency exchange contracts | | | 140,229 | |
Foreign currency denominated assets and liabilities | | | (3,950 | ) |
| | | | |
Net gain on investment and foreign currency transactions | | | 51,339,281 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 50,673,364 | |
| | | | |
See notes to financial statements.
14
| | |
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | |
Net investment income (loss) | | $ | (665,917 | ) | | $ | 127,416 | |
Net realized gain on investment and foreign currency transactions | | | 25,123,789 | | | | 14,163,771 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 26,215,492 | | | | 19,169,007 | |
| | | | | | | | |
Net increase in net assets from operations | | | 50,673,364 | | | | 33,460,194 | |
Distributions to Shareholders | |
Class A | | | (4,560,500 | ) | | | (2,381,432 | ) |
Class B | | | (9,895,739 | ) | | | (5,188,929 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net increase (decrease) | | | 12,279,122 | | | | (5,755,781 | ) |
| | | | | | | | |
Total increase | | | 48,496,247 | | | | 20,134,052 | |
NET ASSETS | |
Beginning of period | | | 136,881,940 | | | | 116,747,888 | |
| | | | | | | | |
End of period | | $ | 185,378,187 | | | $ | 136,881,940 | |
| | | | | | | | |
See notes to financial statements.
15
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Global Thematic Growth Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
16
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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.
17
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks: | | | | | | | | | | | | | | | | |
Information Technology | | $ | 32,990,132 | | | $ | 14,960,565 | | | $ | –0 | – | | $ | 47,950,697 | |
Health Care | | | 25,503,683 | | | | 15,550,410 | | | | –0 | – | | | 41,054,093 | |
Industrials | | | 19,485,353 | | | | 14,074,529 | | | | –0 | – | | | 33,559,882 | |
Financials | | | 7,934,092 | | | | 13,302,612 | | | | –0 | – | | | 21,236,704 | |
Consumer Discretionary | | | 11,400,700 | | | | –0 | – | | | –0 | – | | | 11,400,700 | |
Materials | | | –0 | – | | | 7,338,846 | | | | –0 | – | | | 7,338,846 | |
Utilities | | | 5,535,378 | | | | –0 | – | | | –0 | – | | | 5,535,378 | |
Consumer Staples | | | 2,235,980 | | | | 3,042,849 | | | | –0 | – | | | 5,278,829 | |
Communication Services | | | –0 | – | | | 2,885,346 | | | | –0 | – | | | 2,885,346 | |
Short-Term Investments | | | 8,794,504 | | | | –0 | – | | | –0 | – | | | 8,794,504 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 113,879,822 | | | | 71,155,157 | (a) | | | –0 | – | | | 185,034,979 | |
Other Financial Instruments(b): | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | | –0 | – | | | 611,959 | | | | –0 | – | | | 611,959 | |
Liabilities: | | | | | | | | | | | | | | | | |
Forward Currency Exchange Contracts | | | –0 | – | | | (535,825 | ) | | | –0 | – | | | (535,825 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 113,879,822 | | | $ | 71,231,291 | | | $ | –0 | – | | $ | 185,111,113 | |
| | | | | | | | | | | | | | | | |
| (a) | | 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. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
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, 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.
18
| | |
| |
| | | AB Variable Products Series Fund |
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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 contractually agreed to waive its management fee and/or bear expenses of the Portfolio in order to reduce the Portfolio’s total operating expenses by an amount equal to .05% on an annual basis of the average net assets for Class A and Class B. For the year ended December 31, 2020, such reimbursements/waivers amounted to $72,394. This fee waiver and/or expense reimbursement agreement extends through May 1, 2021 and then may be extended by the Adviser for additional one-year terms.
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, 2020, the reimbursement for such services amounted to $75,347.
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $8,774.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 5,816 | | | $ | 48,449 | | | $ | 45,470 | | | $ | 8,795 | | | $ | 33 | |
19
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 60,093,819 | | | $ | 67,215,084 | |
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 | | $ | 121,998,326 | |
| | | | |
Gross unrealized appreciation | | $ | 64,310,663 | |
Gross unrealized depreciation | | | (1,261,507 | ) |
| | | | |
Net unrealized appreciation | | $ | 63,049,156 | |
| | | | |
20
| | |
| |
| | | AB 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 principal type of derivative 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 forward currency exchange contracts. 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, 2020, 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”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 currency contracts | | Unrealized appreciation on forward currency exchange contracts | | $ | 611,959 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 535,825 | |
| | | | | | | | | | | | |
Total | | | | $ | 611,959 | | | | | $ | 535,825 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on
Derivatives Within Statement of Operations | | Realized Gain or
(Loss) on
Derivatives | | | Change in Unrealized
Appreciation or
(Depreciation) | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | $ | (1,217,590 | ) | | $ | 140,229 | |
| | | | | | | | | | | | |
Total | | | | $ | (1,217,590 | ) | | $ | 140,229 | |
| | | | | | | | | | | | |
21
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 33,860,435 | |
Average principal amount of sale contracts | | $ | 42,573,188 | |
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 OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Derivative
Assets Subject to
a MA | | | Derivatives
Available
for Offset | | | Cash Collateral
Received* | | | Security Collateral
Received* | | | Net Amount of
Derivative
Assets | |
Bank of America, NA | | $ | 1,538 | | | $ | (1,538 | ) | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – |
Barclays Bank PLC | | | 13,273 | | | | (13,273 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
BNP Paribas SA | | | 9,226 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 9,226 | |
Citibank, NA | | | 151,574 | | | | (68,295 | ) | | | –0 | – | | | –0 | – | | | 83,279 | |
Deutsche Bank AG | | | 18,309 | | | | (18,309 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Goldman Sachs Bank USA | | | 150,778 | | | | (150,778 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank, NA | | | 26,641 | | | | (2,169 | ) | | | –0 | – | | | –0 | – | | | 24,472 | |
Morgan Stanley Capital Services, Inc. | | | 21,064 | | | | (107 | ) | | | –0 | – | | | –0 | – | | | 20,957 | |
Natwest Markets PLC | | | 37,712 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 37,712 | |
Standard Chartered Bank | | | 46,364 | | | | (4,193 | ) | | | –0 | – | | | –0 | – | | | 42,171 | |
State Street Bank & Trust Co. | | | 80,594 | | | | (80,594 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
UBS AG | | | 54,886 | | | | (2,676 | ) | | | –0 | – | | | –0 | – | | | 52,210 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 611,959 | | | $ | (341,932 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 270,027 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
| Counterparty | | Derivative
Liabilities Subject
to a MA | | | Derivatives
Available
for Offset | | | Cash Collateral
Pledged* | | | Security Collateral
Pledged* | | | Net Amount of
Derivative
Liabilities | |
Bank of America, NA | | $ | 12,052 | | | $ | (1,538 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 10,514 | |
Barclays Bank PLC | | | 22,342 | | | | (13,273 | ) | | | –0 | – | | | –0 | – | | | 9,069 | |
Citibank, NA | | | 68,295 | | | | (68,295 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Deutsche Bank AG | | | 43,815 | | | | (18,309 | ) | | | –0 | – | | | –0 | – | | | 25,506 | |
Goldman Sachs Bank USA | | | 200,507 | | | | (150,778 | ) | | | –0 | – | | | –0 | – | | | 49,729 | |
JPMorgan Chase Bank, NA | | | 2,169 | | | | (2,169 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley Capital Services, Inc. | | | 107 | | | | (107 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Standard Chartered Bank | | | 4,193 | | | | (4,193 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 179,669 | | | | (80,594 | ) | | | –0 | – | | | –0 | – | | | 99,075 | |
UBS AG | | | 2,676 | | | | (2,676 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 535,825 | | | $ | (341,932 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 193,893 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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
| | |
| |
| | | AB Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. Dollar-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value
of Securities on Loan* | | | Cash
Collateral* | | | Market Value
of Non-Cash
Collateral* | | | Income from
Borrowers | | | Government Money
Market Portfolio | |
| | Income Earned | | | Advisory Fee
Waived | |
| $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 6,088 | | | $ | 0 | | | $ | 0 | |
| * | | As of December 31, 2020. |
23
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | |
Shares sold | | | 200,725 | | | | 114,338 | | | | | | | $ | 7,348,517 | | | $ | 3,589,027 | |
Shares issued in reinvestment of dividends | | | 127,211 | | | | 77,119 | | | | | | | | 4,560,500 | | | | 2,381,432 | |
Shares redeemed | | | (242,399 | ) | | | (210,261 | ) | | | | | | | (8,398,976 | ) | | | (6,622,981 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 85,537 | | | | (18,804 | ) | | | | | | $ | 3,510,041 | | | $ | (652,522 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 515,559 | | | | 303,140 | | | | | | | $ | 18,322,349 | | | $ | 9,139,286 | |
Shares issued in reinvestment of dividends | | | 288,421 | | | | 174,829 | | | | | | | | 9,895,739 | | | | 5,188,929 | |
Shares redeemed | | | (578,470 | ) | | | (643,894 | ) | | | | | | | (19,449,007 | ) | | | (19,431,474 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | 225,510 | | | | (165,925 | ) | | | | | | $ | 8,769,081 | | | $ | (5,103,259 | ) |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 57% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, 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 more difficult to trade 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, and because these investments may be 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 mid-capitalization companies may be more volatile than investments in large-capitalization companies. Investments in mid-capitalization companies may have additional risks because these companies may 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 on the statement of assets and liabilities.
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, or NAV.
LIBOR Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks
24
| | |
| |
| | | AB Variable Products Series Fund |
are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 1,036,748 | | | $ | 316,132 | |
Net long-term capital gains | | | 13,419,491 | | | | 7,254,229 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 14,456,239 | | | $ | 7,570,361 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 1,797,879 | |
Undistributed capital gains | | | 22,914,055 | |
Unrealized appreciation/(depreciation) | | | 63,045,882 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 87,757,816 | |
| | | | |
| (a) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments and the tax deferral of losses on wash sales. |
25
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings 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.
26
| | |
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $33.52 | | | | $27.35 | | | | $30.32 | | | | $22.29 | | | | $22.43 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a)(b) | | | (.10 | ) | | | .08 | | | | .11 | | | | .03 | | | | .04 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | 12.64 | | | | 8.00 | | | | (3.08 | ) | | | 8.13 | | | | (.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 12.54 | | | | 8.08 | | | | (2.97 | ) | | | 8.16 | | | | (.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.24 | ) | | | (.13 | ) | | | –0 | – | | | (.13 | ) | | | –0 | – |
Distributions from net realized gain on investment transactions | | | (3.42 | ) | | | (1.78 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (3.66 | ) | | | (1.91 | ) | | | –0 | – | | | (.13 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $42.40 | | | | $33.52 | | | | $27.35 | | | | $30.32 | | | | $22.29 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 39.41 | % | | | 30.16 | % | | | (9.79 | )% | | | 36.66 | % | | | (.62 | )%† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $58,316 | | | | $43,237 | | | | $35,799 | | | | $40,121 | | | | $28,458 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (d)‡ | | | .94 | % | | | .99 | % | | | .99 | % | | | 1.02 | % | | | 1.06 | % |
Expenses, before
waivers/reimbursements (d)‡ | | | 1.00 | % | | | 1.04 | % | | | 1.01 | % | | | 1.02 | % | | | 1.06 | % |
Net investment income (loss) (b) | | | (.29 | )% | | | .27 | % | | | .37 | % | | | .09 | % | | | .17 | %† |
Portfolio turnover rate | | | 44 | % | | | 43 | % | | | 32 | % | | | 40 | % | | | 54 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .01 | % | | | .00 | % | | | .00 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 29.
27
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| FINANCIAL HIGHLIGHTS |
| |
| (continued) | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $32.19 | | | | $26.33 | | | | $29.25 | | | | $21.52 | | | | $21.71 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a)(b) | | | (.18 | ) | | | .01 | | | | .04 | | | | (.04 | ) | | | (.02 | )† |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | 12.11 | | | | 7.68 | | | | (2.96 | ) | | | 7.84 | | | | (.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 11.93 | | | | 7.69 | | | | (2.92 | ) | | | 7.80 | | | | (.19 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.16 | ) | | | (.05 | ) | | | –0 | – | | | (.07 | ) | | | –0 | – |
Distributions from net realized gain on investment transactions | | | (3.42 | ) | | | (1.78 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (3.58 | ) | | | (1.83 | ) | | | –0 | – | | | (.07 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $40.54 | | | | $32.19 | | | | $26.33 | | | | $29.25 | | | | $21.52 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 39.08 | % | | | 29.78 | % | | | (9.98 | )% | | | 36.30 | % | | | (.87 | )%† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $127,062 | | | | $93,645 | | | | $80,949 | | | | $106,331 | | | | $78,625 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/
reimbursements (d)‡ | | | 1.19 | % | | | 1.24 | % | | | 1.24 | % | | | 1.26 | % | | | 1.31 | % |
Expenses, before waivers/
reimbursements (d)‡ | | | 1.25 | % | | | 1.29 | % | | | 1.25 | % | | | 1.27 | % | | | 1.31 | % |
Net investment income (loss) (b) | | | (.54 | )% | | | .02 | % | | | .13 | % | | | (.15 | )% | | | (.07 | )%† |
Portfolio turnover rate | | | 44 | % | | | 43 | % | | | 32 | % | | | 40 | % | | | 54 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
Portfolios | | | .01 | % | | | .00 | % | | | .00 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 29.
28
| | |
| |
| | | AB Variable Products Series Fund |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (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. |
| (d) | | In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the year ended December 31, 2020, such waiver amounted to .01%. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total Return |
| $.004 | | .02% | | .02% |
| * | | 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, 2017 and December 31, 2016 by .04% and .28%, respectively. |
See notes to financial statements.
29
| | |
| | | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Global Thematic Growth Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Global Thematic Growth Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
30
| | |
| | |
| | |
| |
| 2020 FEDERAL TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 46.07% of dividends paid qualify for the dividends received deduction. The Portfolio designates $13,419,491 of dividends paid as long-term capital gain dividends.
31
| | |
| | | |
| | |
| |
| GLOBAL THEMATIC GROWTH PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Daniel C. Roarty(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 1 Iron Street Boston, MA 02210 | | One Battery Park Plaza New York, NY 10004 |
| | |
| DISTRIBUTOR | | TRANSFER AGENT |
| AllianceBernstein Investments, Inc. | | AllianceBernstein Investor Services, Inc. |
1345 Avenue of the Americas New York, NY 10105 | | P.O. Box 786003 San Antonio, TX 78278-6003 Toll-Free (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 Thematic and Sustainable Equities Investment Team. Mr. Roarty is the investment professional with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
32
| | |
| | | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| MANAGEMENT OF THE FUND | | AB 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 INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 79 (2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
Jorge A. Bermudez, ## 69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
33
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
MANAGEMENT OF THE FUND | | |
| |
(continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Michael J. Downey, ## 77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin, ## 72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
Jeanette W. Loeb, ##
68
(2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen, ## 65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
34
| | |
|
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Garry L. Moody, ## 68 (2008) | | Private Investor since prior to 2016. 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) where he was responsible for accounting, pricing, custody and reporting for the Fidelity Mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees of the AB Funds since 2008. | | | 74 | | | None |
| | | | | | | | |
Earl D. Weiner, ## 81 (2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
35
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
MANAGEMENT OF THE FUND | | |
| |
(continued) | | AB 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^ 60 | | President and Chief
Executive Officer | | See biography above. |
| | | | |
Daniel C. Roarty
49 | | Vice President
| | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of Sustainable Thematic Equities. |
| | | | |
Emilie D. Wrapp
65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes
44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo
61 | | Treasurer and Chief
Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke
60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto
56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
36
| | |
| | |
|
| |
| GLOBAL THEMATIC GROWTH PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
37
| | |
| | | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Global Thematic Growth Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance Officer. The directors noted the assumptions and methods of allocation used by the Adviser in preparing fund-specific profitability data and 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
38
| | |
|
| | |
| |
| | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median. The directors also took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with those for two other funds advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to funds such as the Fund, and the different
39
| | |
| GLOBAL THEMATIC GROWTH PORTFOLIO |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the peer group median, after giving effect to a voluntary waiver by the Adviser. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
40
VPS-GTG-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS SERIES FUND, INC.
| + | | GROWTH AND INCOME PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| GROWTH AND INCOME PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Growth and Income Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in the equity securities of US companies that the Adviser believes are trading at attractive valuations that have strong or improving business models.
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 (“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 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, 2020.
All share classes of the Portfolio underperformed the benchmark for the annual period. Security selection detracted most, relative to the benchmark, due to selection within the financials and industrials sectors. Selection within technology and consumer staples contributed. Overall sector selection contributed to performance. Underweights to materials and consumer staples detracted, while an underweight to energy and an overweight to technology contributed.
The Portfolio did not utilize derivatives during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio’s Senior Investment Management Team (the “Team”) remains committed to using bottom-up research to build a Portfolio composed of well-managed companies that are attractively valued relative to their long-term earnings power. The Team’s objective is to find companies that stand out and deploy capital wisely, allowing these companies to grow dividends and enhance the long-term value of their shares.
1
| | |
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The Russell 1000® Value Index is unmanaged and 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 large-cap value companies within the US. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s value approach, may be underperforming 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- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Industry/Sector Risk: Investments in a particular sector, industry or group of related industries may have more risk because market or economic factors affecting that sector or 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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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 AND INCOME PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARK | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Growth and Income Portfolio Class A | | | 2.72% | | | | 9.72% | | | | 11.57% | |
| | | |
| Growth and Income Portfolio Class B | | | 2.47% | | | | 9.46% | | | | 11.29% | |
| | | |
| Russell 1000 Value Index | | | 2.80% | | | | 9.74% | | | | 10.50% | |
1 Average annual returns. | | | | | | | | | | | | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.63% and 0.88% for Class A and Class B shares, respectively. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.62% and 0.87% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 TO 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in the Growth and Income Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmark. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on page 2.
3
| | |
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | | | Total
Expenses Paid
During Period+ | | | Total
Annualized
Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,224.00 | | | $ | 3.47 | | | | 0.62 | % | | $ | 3.52 | | | | 0.63 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,022.02 | | | $ | 3.15 | | | | 0.62 | % | | $ | 3.20 | | | | 0.63 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,222.30 | | | $ | 4.86 | | | | 0.87 | % | | $ | 4.92 | | | | 0.88 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.76 | | | $ | 4.42 | | | | 0.87 | % | | $ | 4.47 | | | | 0.88 | % |
| * | | Expenses are equal to the classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| + | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
4
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Berkshire Hathaway, Inc. | | $ | 40,598,582 | | | | 4.0 | % |
Comcast Corp. | | | 38,690,064 | | | | 3.8 | |
Verizon Communications, Inc. | | | 30,012,438 | | | | 3.0 | |
Roche Holding AG | | | 30,001,027 | | | | 3.0 | |
Amgen, Inc. | | | 29,852,813 | | | | 2.9 | |
Philip Morris International, Inc. | | | 27,486,280 | | | | 2.7 | |
Leidos Holdings, Inc. | | | 26,891,273 | | | | 2.7 | |
Walmart, Inc. | | | 25,896,115 | | | | 2.5 | |
Allstate Corp. (The) | | | 25,316,879 | | | | 2.5 | |
Emerson Electric Co. | | | 25,161,838 | | | | 2.5 | |
| | | | | | | | | |
| | | $ | 299,907,309 | | | | 29.6 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 188,797,034 | | | | 18.6 | % |
Industrials | | | 169,610,587 | | | | 16.8 | |
Information Technology | | | 144,077,942 | | | | 14.2 | |
Health Care | | | 140,169,093 | | | | 13.8 | |
Consumer Discretionary | | | 130,229,392 | | | | 12.9 | |
Communication Services | | | 78,147,121 | | | | 7.7 | |
Consumer Staples | | | 53,382,395 | | | | 5.3 | |
Energy | | | 25,014,246 | | | | 2.5 | |
Materials | | | 22,504,694 | | | | 2.2 | |
Real Estate | | | 22,341,112 | | | | 2.2 | |
Short-Term Investments | | | 38,261,606 | | | | 3.8 | |
| | | | | | | | | |
Total Investments | | $ | 1,012,535,222 | | | | 100.0 | % |
| 2 | | 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 AND INCOME PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–96.2% | | | | | | | | |
| | | | | | | | |
FINANCIALS–18.6% | | | | | | | | |
BANKS–6.3% | | | | | | | | |
Citigroup, Inc. | | | 271,560 | | | $ | 16,744,390 | |
JPMorgan Chase & Co. | | | 184,890 | | | | 23,493,972 | |
Wells Fargo & Co. | | | 801,860 | | | | 24,200,135 | |
| | | | | | | | |
| | | | | | | 64,438,497 | |
| | | | | | | | |
CAPITAL MARKETS–2.8% | |
Goldman Sachs Group, Inc. (The) | | | 26,600 | | | | 7,014,686 | |
LPL Financial Holdings, Inc. | | | 82,371 | | | | 8,584,706 | |
Northern Trust Corp. | | | 140,450 | | | | 13,081,513 | |
| | | | | | | | |
| | | | | | | 28,680,905 | |
| | | | | | | | |
CONSUMER FINANCE–0.5% | |
Capital One Financial Corp. | | | 48,346 | | | | 4,779,002 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–4.0% | | | | | | | | |
Berkshire Hathaway, Inc.–Class B(a) | | | 175,092 | | | | 40,598,582 | |
| | | | | | | | |
INSURANCE–5.0% | |
Aflac, Inc. | | | 142,500 | | | | 6,336,975 | |
Allstate Corp. (The) | | | 230,300 | | | | 25,316,879 | |
Fidelity National Financial, Inc. | | | 383,590 | | | | 14,994,533 | |
Reinsurance Group of America, Inc.–Class A | | | 31,507 | | | | 3,651,661 | |
| | | | | | | | |
| | | | | | | 50,300,048 | |
| | | | | | | | |
| | | | | | | 188,797,034 | |
| | | | | | | | |
INDUSTRIALS–16.8% | | | | | | | | |
AEROSPACE & DEFENSE–3.1% | | | | | | | | |
Curtiss-Wright Corp. | | | 67,160 | | | | 7,814,066 | |
Hexcel Corp. | | | 169,684 | | | | 8,227,977 | |
Raytheon Technologies Corp. | | | 220,643 | | | | 15,778,181 | |
| | | | | | | | |
| | | | | | | 31,820,224 | |
| | | | | | | | |
AIRLINES–0.4% | |
Southwest Airlines Co. | | | 81,640 | | | | 3,805,240 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–2.2% | | | | | | | | |
EMCOR Group, Inc. | | | 116,720 | | | | 10,675,211 | |
Valmont Industries, Inc. | | | 65,352 | | | | 11,432,026 | |
| | | | | | | | |
| | | | | | | 22,107,237 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–3.6% | | | | | | | | |
Emerson Electric Co. | | | 313,075 | | | | 25,161,838 | |
Hubbell, Inc. | | | 75,173 | | | | 11,786,374 | |
| | | | | | | | |
| | | | | | | 36,948,212 | |
| | | | | | | | |
INDUSTRIAL CONGLOMERATES–0.8% | | | | | | | | |
3M Co. | | | 43,840 | | | | 7,662,794 | |
| | | | | | | | |
MACHINERY–2.4% | |
Altra Industrial Motion Corp. | | | 171,232 | | | | 9,491,390 | |
Crane Co. | | | 107,479 | | | | 8,346,819 | |
| | | | | | | | |
Middleby Corp. (The)(a) | | | 34,780 | | | | 4,483,837 | |
Westinghouse Air Brake Technologies Corp. | | | 24,680 | | | | 1,806,576 | |
| | | | | | | | |
| | | | | | | 24,128,622 | |
| | | | | | | | |
PROFESSIONAL SERVICES–1.5% | | | | | | | | |
Robert Half International, Inc. | | | 242,470 | | | | 15,149,526 | |
| | | | | | | | |
ROAD & RAIL–2.1% | | | | | | | | |
Kansas City Southern | | | 59,890 | | | | 12,225,346 | |
Knight-Swift Transportation Holdings, Inc. | | | 214,888 | | | | 8,986,616 | |
| | | | | | | | |
| | | | | | | 21,211,962 | |
| | | | | | | | |
TRADING COMPANIES &
DISTRIBUTORS–0.7% | | | | | | | | |
MSC Industrial Direct Co., Inc.–Class A | | | 80,303 | | | | 6,776,770 | |
| | | | | | | | |
| | | | | | | 169,610,587 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–14.2% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–4.3% | | | | | | | | |
Ciena Corp.(a) | | | 79,530 | | | | 4,203,160 | |
Cisco Systems, Inc. | | | 314,340 | | | | 14,066,715 | |
F5 Networks, Inc.(a) | | | 120,690 | | | | 21,234,199 | |
Lumentum Holdings, Inc.(a) | | | 42,517 | | | | 4,030,612 | |
| | | | | | | | |
| | | | | | | 43,534,686 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS &
COMPONENTS–2.0% | | | | | | | | |
Dolby Laboratories, Inc.–Class A | | | 63,799 | | | | 6,196,797 | |
Keysight Technologies, Inc.(a) | | | 74,540 | | | | 9,845,989 | |
Littelfuse, Inc. | | | 15,763 | | | | 4,014,205 | |
| | | | | | | | |
| | | | | | | 20,056,991 | |
| | | | | | | | |
IT SERVICES–6.3% | | | | | | | | |
Akamai Technologies, Inc.(a) | | | 84,940 | | | | 8,917,851 | |
Cognizant Technology Solutions Corp.–Class A | | | 119,790 | | | | 9,816,790 | |
Leidos Holdings, Inc. | | | 255,815 | | | | 26,891,273 | |
MAXIMUS, Inc. | | | 251,854 | | | | 18,433,194 | |
| | | | | | | | |
| | | | | | | 64,059,108 | |
| | | | | | | | |
SEMICONDUCTORS &
SEMICONDUCTOR EQUIPMENT–1.6% | | | | | | | | |
Lam Research Corp. | | | 19,970 | | | | 9,431,232 | |
MKS Instruments, Inc. | | | 46,500 | | | | 6,995,925 | |
| | | | | | | | |
| | | | | | | 16,427,157 | |
| | | | | | | | |
| | | | | | | 144,077,942 | |
| | | | | | | | |
HEALTH CARE–13.8% | | | | | | | | |
BIOTECHNOLOGY–5.3% | | | | | | | | |
Alexion Pharmaceuticals, Inc.(a) | | | 150,900 | | | | 23,576,616 | |
Amgen, Inc. | | | 129,840 | | | | 29,852,813 | |
| | | | | | | | |
| | | | | | | 53,429,429 | |
| | | | | | | | |
6
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
HEALTH CARE PROVIDERS &
SERVICES–4.2% | | | | | | | | |
Anthem, Inc. | | | 60,590 | | | $ | 19,454,843 | |
Cigna Corp. | | | 96,171 | | | | 20,020,879 | |
Quest Diagnostics, Inc. | | | 26,860 | | | | 3,200,906 | |
| | | | | | | | |
| | | | | | | 42,676,628 | |
| | | | | | | | |
PHARMACEUTICALS–4.3% | | | | | | | | |
Pfizer, Inc. | | | 382,016 | | | | 14,062,009 | |
Roche Holding AG (Sponsored ADR) | | | 684,330 | | | | 30,001,027 | |
| | | | | | | | |
| | | | | | | 44,063,036 | |
| | | | | | | | |
| | | | | | | 140,169,093 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–12.9% | | | | | | | | |
AUTO COMPONENTS–2.4% | | | | | | | | |
BorgWarner, Inc. | | | 301,450 | | | | 11,648,028 | |
Gentex Corp. | | | 357,280 | | | | 12,122,510 | |
| | | | | | | | |
| | | | | | | 23,770,538 | |
| | | | | | | | |
DISTRIBUTORS–2.1% | | | | | | | | |
LKQ Corp.(a) | | | 611,870 | | | | 21,562,299 | |
| | | | | | | | |
HOUSEHOLD DURABLES–2.7% | | | | | | | | |
DR Horton, Inc. | | | 276,920 | | | | 19,085,327 | |
Garmin Ltd. | | | 67,690 | | | | 8,099,785 | |
| | | | | | | | |
| | | | | | | 27,185,112 | |
| | | | | | | | |
MULTILINE RETAIL–2.8% | | | | | | | | |
Dollar General Corp. | | | 41,260 | | | | 8,676,978 | |
Target Corp. | | | 112,790 | | | | 19,910,819 | |
| | | | | | | | |
| | | | | | | 28,587,797 | |
| | | | | | | | |
SPECIALTY RETAIL–1.9% | | | | | | | | |
AutoZone, Inc.(a) | | | 6,540 | | | | 7,752,777 | |
Murphy USA, Inc. | | | 87,040 | | | | 11,390,925 | |
| | | | | | | | |
| | | | | | | 19,143,702 | |
| | | | | | | | |
TEXTILES, APPAREL &
LUXURY GOODS–1.0% | | | | | | | | |
Deckers Outdoor Corp.(a) | | | 34,800 | | | | 9,979,944 | |
| | | | | | | | |
| | | | | | | 130,229,392 | |
| | | | | | | | |
COMMUNICATION SERVICES–7.7% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION
SERVICES–6.8% | | | | | | | | |
Comcast Corp.–Class A | | | 738,360 | | | | 38,690,064 | |
Verizon Communications, Inc. | | | 510,850 | | | | 30,012,438 | |
| | | | | | | | |
| | | | | | | 68,702,502 | |
| | | | | | | | |
MEDIA–0.9% | | | | | | | | |
Discovery, Inc.–Class A(a)(b) | | | 313,879 | | | | 9,444,619 | |
| | | | | | | | |
| | | | | | | 78,147,121 | |
| | | | | | | | |
CONSUMER STAPLES–5.3% | | | | | | | | |
FOOD & STAPLES RETAILING–2.6% | | | | | | | | |
Walmart, Inc. | | | 179,647 | | | | 25,896,115 | |
| | | | | | | | |
| | | | | | | | |
TOBACCO–2.7% | | | | | | | | |
Philip Morris International, Inc. | | | 332,000 | | | | 27,486,280 | |
| | | | | | | | |
| | | | | | | 53,382,395 | |
| | | | | | | | |
ENERGY–2.5% | | | | | | | | |
ENERGY EQUIPMENT & SERVICES–0.4% | | | | | | | | |
Helmerich & Payne, Inc. | | | 155,809 | | | | 3,608,536 | |
| | | | | | | | |
OIL, GAS &
CONSUMABLE FUELS–2.1% | | | | | | | | |
Chevron Corp. | | | 54,090 | | | | 4,567,900 | |
ConocoPhillips(b) | | | 95,940 | | | | 3,836,641 | |
EOG Resources, Inc. | | | 148,800 | | | | 7,420,656 | |
Phillips 66 | | | 79,790 | | | | 5,580,513 | |
| | | | | | | | |
| | | | | | | 21,405,710 | |
| | | | | | | | |
| | | | | | | 25,014,246 | |
| | | | | | | | |
MATERIALS–2.2% | | | | | | | | |
CONTAINERS & PACKAGING–0.5% | | | | | | | | |
Avery Dennison Corp. | | | 30,760 | | | | 4,771,184 | |
| | | | | | | | |
METALS & MINING–1.7% | | | | | | | | |
BHP Group Ltd. (Sponsored ADR)(b) | | | 179,680 | | | | 11,740,291 | |
Steel Dynamics, Inc. | | | 162,550 | | | | 5,993,219 | |
| | | | | | | | |
| | | | | | | 17,733,510 | |
| | | | | | | | |
| | | | | | | 22,504,694 | |
| | | | | | | | |
REAL ESTATE–2.2% | | | | | | | | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)–0.4% | | | | | | | | |
Mid-America Apartment Communities, Inc. | | | 34,820 | | | | 4,411,346 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–1.8% | | | | | | | | |
CBRE Group, Inc.–Class A(a) | | | 285,870 | | | | 17,929,766 | |
| | | | | | | | |
| | | | | | | 22,341,112 | |
| | | | | | | | |
Total Common Stocks
(cost $765,506,509) | | | | | | | 974,273,616 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–3.8% | | | | | | | | |
INVESTMENT COMPANIES–3.8% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government
Money Market
Portfolio–Class AB, 0.03%(c)(d)(e)
(cost $38,261,606) | | | 38,261,606 | | | | 38,261,606 | |
| | | | | | | | |
TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL FOR SECURITIES
LOANED–100.0%
(cost $803,768,115) | | | | | | | 1,012,535,222 | |
| | | | | | | | |
7
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.3% | | | | | | | | |
INVESTMENT COMPANIES–1.3% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(c)(d)(e)
(cost $13,100,982) | | | 13,100,982 | | | $ | 13,100,982 | |
| | | | | | | | |
TOTAL
INVESTMENTS–101.3%
(cost $816,869,097) | | | | | | | 1,025,636,204 | |
Other assets less
liabilities–(1.3)% | | | | | | | (13,652,125 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 1,011,984,079 | |
| | | | | | | | |
| (a) | | Non-income producing security. |
| (b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (c) | | Affiliated investments. |
| (d) | | The rate shown represents the 7-day yield as of period end. |
| (e) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Glossary:
ADR—American Depositary Receipt
REIT—Real Estate Investment Trust
See notes to financial statements.
8
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $765,506,509) | | $ | 974,273,616 | (a) |
Affiliated issuers (cost $51,362,588—including investment of cash collateral for securities loaned of $13,100,982) | | | 51,362,588 | |
Unaffiliated dividends receivable | | | 1,161,850 | |
Receivable for capital stock sold | | | 53,916 | |
Affiliated dividends receivable | | | 1,609 | |
| | | | |
Total assets | | | 1,026,853,579 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 13,100,982 | |
Payable for capital stock redeemed | | | 803,741 | |
Advisory fee payable | | | 464,059 | |
Distribution fee payable | | | 182,715 | |
Administrative fee payable | | | 20,350 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 297,507 | |
| | | | |
Total liabilities | | | 14,869,500 | |
| | | | |
NET ASSETS | | $ | 1,011,984,079 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 35,497 | |
Additional paid-in capital | | | 836,081,392 | |
Distributable earnings | | | 175,867,190 | |
| | | | |
| | $ | 1,011,984,079 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 143,269,065 | | | | 4,944,735 | | | $ | 28.97 | |
| | | |
| B | | $ | 868,715,014 | | | | 30,552,632 | | | $ | 28.43 | |
| |
| (a) | | Includes securities on loan with a value of $22,504,500 (see Note E). |
See notes to financial statements.
9
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $154,220) | | $ | 19,120,821 | |
Affiliated issuers | | | 418,251 | |
Securities lending income | | | 69,694 | |
| | | | |
| | | 19,608,766 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 5,042,274 | |
Distribution fee—Class B | | | 1,963,701 | |
Transfer agency—Class A | | | 1,357 | |
Transfer agency—Class B | | | 8,124 | |
Custody and accounting | | | 194,971 | |
Printing | | | 160,089 | |
Legal | | | 110,657 | |
Administrative | | | 58,253 | |
Audit and tax | | | 47,453 | |
Directors’ fees | | | 29,771 | |
Miscellaneous | | | 38,897 | |
| | | | |
Total expenses | | | 7,655,547 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (75,707 | ) |
| | | | |
Net expenses | | | 7,579,840 | |
| | | | |
Net investment income | | | 12,028,926 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | |
Net realized loss on investment transactions | | | (36,028,265 | ) |
Net change in unrealized appreciation/depreciation of investments | | | 38,846,348 | |
| | | | |
Net gain on investment transactions | | | 2,818,083 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 14,847,009 | |
| | | | |
See notes to financial statements.
10
| | |
| | | |
| GROWTH AND INCOME PORTFOLIO | | |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income | | $ | 12,028,926 | | | $ | 12,473,520 | |
Net realized gain (loss) on investment transactions | | | (36,028,265 | ) | | | 40,276,635 | |
Net change in unrealized appreciation/depreciation of investments | | | 38,846,348 | | | | 159,345,540 | |
| | | | | | | | |
Net increase in net assets from operations | | | 14,847,009 | | | | 212,095,695 | |
Distributions to Shareholders | | | | | | | | |
Class A | | | (9,106,244 | ) | | | (17,238,473 | ) |
Class B | | | (53,075,328 | ) | | | (105,878,573 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net increase (decrease) | | | (19,049,810 | ) | | | 83,297,353 | |
| | | | | | | | |
Total increase (decrease) | | | (66,384,373 | ) | | | 172,276,002 | |
NET ASSETS | |
Beginning of period | | | 1,078,368,452 | | | | 906,092,450 | |
| | | | | | | | |
End of period | | $ | 1,011,984,079 | | | $ | 1,078,368,452 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Growth and Income Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Portfolio acquired the assets and liabilities of AB Value Portfolio (the “Acquired Portfolio”) a reorganization that was effective at the close of business April 26, 2019 (the “Reorganization”). The Reorganization was approved by the Fund’s Board of Directors pursuant to a Plan of Acquisition and Liquidation (the “Reorganization Agreement”) (see Note J for additional information). The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but
12
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks(a) | | $ | 974,273,616 | | | $ | –0 | – | | $ | –0 | – | | $ | 974,273,616 | |
Short-Term Investments | | | 38,261,606 | | | | –0 | – | | | –0 | – | | | 38,261,606 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 13,100,982 | | | | –0 | – | | | –0 | – | | | 13,100,982 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 1,025,636,204 | | | | –0 | – | | | –0 | – | | | 1,025,636,204 | |
Other Financial Instruments(b) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total | | $ | 1,025,636,204 | | | $ | –0 | – | | $ | –0 | – | | $ | 1,025,636,204 | |
| | | | | | | | | | | | | | | | |
| (a) | | See Portfolio of Investments for sector classifications. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
13
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 .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, 2020, the reimbursement for such services amounted to $58,253.
14
| | |
| |
| | | AB Variable Products Series Fund |
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $73,880.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 128,696 | | | $ | 284,982 | | | $ | 375,416 | | | $ | 38,262 | | | $ | 418 | |
Government Money Market Portfolio* | | | 3,697 | | | | 91,017 | | | | 81,613 | | | | 13,101 | | | | 36 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 51,363 | | | $ | 454 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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.
15
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 481,983,360 | | | $ | 460,794,311 | |
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 | | $ | 822,022,797 | |
| | | | |
Gross unrealized appreciation | | $ | 226,367,554 | |
Gross unrealized depreciation | | | (22,754,147 | ) |
| | | | |
Net unrealized appreciation | | $ | 203,613,407 | |
| | | | |
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, 2020.
2. Currency Transactions
The Portfolio may invest in non-U.S. Dollar-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, an eligible money market vehicle, in accordance with the investment restrictions of the Portfolio,
16
| | |
| |
| | | AB Variable Products Series Fund |
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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value of
Securities on Loan* | | | Cash Collateral* | | | Market Value of
Non-Cash
Collateral* | | | Income from
Borrowers | | | Government Money Market
Portfolio | |
| | Income Earned | | | Advisory Fee
Waived | |
| $ | 22,504,500 | | | $ | 13,100,982 | | | $ | 10,043,081 | | | $ | 33,906 | | | $ | 35,788 | | | $ | 1,827 | |
| * | | As of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 711,385 | | | | 661,146 | | | | | | | $ | 18,355,193 | | | $ | 19,709,589 | |
Shares issued in reinvestment of dividends and distributions | | | 361,798 | | | | 625,489 | | | | | | | | 9,106,244 | | | | 17,238,473 | |
Shares issued in connection with the Reorganization | | | –0 | – | | | 34,530 | | | | | | | | –0 | – | | | 1,088,086 | |
Shares redeemed | | | (1,268,671 | ) | | | (976,078 | ) | | | | | | | (32,792,160 | ) | | | (29,114,576 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (195,488 | ) | | | 345,087 | | | | | | | $ | (5,330,723 | ) | | $ | 8,921,572 | |
| | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 2,404,541 | | | | 1,565,254 | | | | | | | $ | 60,446,536 | | | $ | 46,221,157 | |
Shares issued in reinvestment of dividends and distributions | | | 2,145,887 | | | | 3,906,958 | | | | | | | | 53,075,328 | | | | 105,878,573 | |
Share issued in connection with the Reorganization | | | –0 | – | | | 1,788,938 | | | | | | | | –0 | – | | | 55,438,527 | |
Shares redeemed | | | (4,994,251 | ) | | | (4,537,077 | ) | | | | | | | (127,240,951 | ) | | | (133,162,476 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (443,823 | ) | | | 2,724,073 | | | | | | | $ | (13,719,087 | ) | | $ | 74,375,781 | |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 60% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as Portfolio’s value approach, may be underperforming the market generally.
17
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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- and mid-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 on the statement of assets and liabilities.
Industry/Sector Risk—Investments in a particular sector, industry or group of related industries may have more risk because market or economic factors affecting that sector or industry could have a significant effect on the value of the Portfolio’s investments.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
18
| | |
| |
| | | AB Variable Products Series Fund |
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 17,089,865 | | | $ | 32,357,161 | |
Net long-term capital gains | | | 45,091,707 | | | | 90,759,885 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 62,181,572 | | | $ | 123,117,046 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 7,412,106 | |
Accumulated capital and other losses | | | (35,158,323 | )(a) |
Unrealized appreciation/(depreciation) | | | 203,613,407 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 175,867,190 | |
| | | | |
| (a) | | As of December 31, 2020, the Portfolio had a net capital loss carryforward of $35,158,323. |
| (b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio had a net short-term capital loss carryforward of $28,209,154 and a net long-term capital loss carryforward of $6,949,169, which may be carried forward for an indefinite period.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings or additional paid-in capital.
NOTE J: Reorganization
At a meeting held on November 6-8, 2018, the Board of the Fund approved the acquisition of the assets and assumption of the liabilities of the Acquired Portfolio by the Portfolio, each a series of the Fund. The Portfolios have the same investment objective and certain similarities in investment strategies, as both Portfolios seek long-term growth of capital and invest in the securities of U.S. companies, using a value approach to investing. The Reorganization was completed at the close of business April 26, 2019. Pursuant to the Reorganization, the assets and liabilities of the Acquired Portfolio shares were transferred in exchange for the shares of the same class of the Portfolio, in a tax-free exchange as follows:
| | | | | | | | | | | | | | | | |
| | | Shares
outstanding
before the
Reorganization | | | Shares
outstanding
immediately
after the
Reorganization | | | Aggregate
net assets
before the
Reorganization | | | Aggregate
net assets
immediately
after the
Reorganization | |
The Acquired Portfolio | | | 3,830,499 | | | | –0 | – | | $ | 56,526,613 | + | | $ | –0 | – |
The Portfolio | | | 32,453,079 | | | | 34,276,547 | | | $ | 1,008,129,745 | ++ | | $ | 1,064,656,358 | |
| + | | Includes distributions in excess of net investment income of $9,338, accumulated realized gain on investments of $4,555,184 and unrealized appreciation on investments of $1,082,388, with a fair value of $49,044,206 and identified cost of $47,961,818. |
| ++ | | Includes undistributed net investment income of $15,078,001, accumulated realized gain on investments of $114,156,821 and unrealized appreciation on investments of $119,935,920, with a fair value of $1,011,419,058 and identified cost of $891,483,138. |
Assuming the acquisition of the Acquired Portfolio had been completed on January 1, 2019, the Portfolio’s pro forma results of operations for the year ended December 31, 2019, are as follows:
| | | | |
Net investment income | | $ | 12,576,934 | |
Net realized and unrealized gain on investments | | | 206,217,063 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 218,793,997 | |
| | | | |
19
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Portfolio that have been included in the Portfolio’s Statement of Operations since April 26, 2019.
For financial reporting purposes, assets received and shares issued by the Portfolio were recorded at fair value; however, the cost basis of the investments received from the Acquired Portfolio was carried forward to align ongoing reporting of the Portfolio’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
NOTE K: 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.
20
| | |
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $30.30 | | | | $27.78 | | | | $33.35 | | | | $31.21 | | | | $30.12 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .40 | | | | .43 | | | | .41 | | | | .31 | | | | .43 | † |
Net realized and unrealized gain (loss) on investment transactions | | | .13 | | | | 5.84 | | | | (1.84 | ) | | | 5.21 | | | | 2.84 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .53 | | | | 6.27 | | | | (1.43 | ) | | | 5.52 | | | | 3.27 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.42 | ) | | | (.39 | ) | | | (.34 | ) | | | (.49 | ) | | | (.32 | ) |
Distributions from net realized gain on investment transactions | | | (1.44 | ) | | | (3.36 | ) | | | (3.80 | ) | | | (2.89 | ) | | | (1.86 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (1.86 | ) | | | (3.75 | ) | | | (4.14 | ) | | | (3.38 | ) | | | (2.18 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $28.97 | | | | $30.30 | | | | $27.78 | | | | $33.35 | | | | $31.21 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 2.72 | % | | | 23.91 | % | | | (5.61 | )% | | | 18.93 | % | | | 11.30 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $143,269 | | | | $155,765 | | | | $133,188 | | | | $159,324 | | | | $155,924 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)‡ | | | .61 | % | | | .61 | % | | | .59 | % | | | .60 | % | | | .61 | % |
Expenses, before waivers/reimbursements (e)‡ | | | .62 | % | | | .62 | % | | | .60 | % | | | .60 | % | | | .61 | % |
Net investment income (b) | | | 1.53 | % | | | 1.43 | % | | | 1.28 | % | | | .97 | % | | | 1.46 | %† |
Portfolio turnover rate | | | 54 | % | | | 66 | % | | | 96 | % | | | 85 | % | | | 101 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .01 | % | | | .01 | % | | | .01 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 23.
21
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| FINANCIAL HIGHLIGHTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $29.76 | | | | $27.34 | | | | $32.88 | | | | $30.82 | | | | $29.78 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .33 | | | | .35 | | | | .33 | | | | .23 | | | | .36 | † |
Net realized and unrealized gain (loss) on investment transactions | | | .13 | | | | 5.74 | | | | (1.81 | ) | | | 5.14 | | | | 2.79 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .46 | | | | 6.09 | | | | (1.48 | ) | | | 5.37 | | | | 3.15 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.35 | ) | | | (.31 | ) | | | (.26 | ) | | | (.42 | ) | | | (.25 | ) |
Distributions from net realized gain on investment transactions | | | (1.44 | ) | | | (3.36 | ) | | | (3.80 | ) | | | (2.89 | ) | | | (1.86 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (1.79 | ) | | | (3.67 | ) | | | (4.06 | ) | | | (3.31 | ) | | | (2.11 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $28.43 | | | | $29.76 | | | | $27.34 | | | | $32.88 | | | | $30.82 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 2.47 | % | | | 23.61 | % | | | (5.84 | )% | | | 18.59 | % | | | 11.07 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $868,715 | | | | $922,603 | | | | $772,904 | | | | $906,790 | | | | $886,666 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)‡ | | | .86 | % | | | .86 | % | | | .84 | % | | | .85 | % | | | .86 | % |
Expenses, before waivers/reimbursements (e)‡ | | | .87 | % | | | .87 | % | | | .85 | % | | | .85 | % | | | .86 | % |
Net investment income (b) | | | 1.28 | % | | | 1.18 | % | | | 1.03 | % | | | .72 | % | | | 1.21 | %† |
Portfolio turnover rate | | | 54 | % | | | 66 | % | | | 96 | % | | | 85 | % | | | 101 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .01 | % | | | .01 | % | | | .01 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 23.
22
| | |
| |
| | | AB Variable Products Series Fund |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Amount is less than $.005. |
| (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. |
| (e) | | In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the years ended December 31, 2020, December 31, 2019 and December 31, 2018, such waiver amounted to .01%, .01% and .01%, respectively. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total
Return |
| $.002 | | .01% | | .01% |
| * | | 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, 2019, December 31, 2018, December 31, 2017 and December 31, 2016 by .15%, .02%, .68% and .03%, respectively. |
Includes the impact of a reimbursement from the Adviser as a result of an error made by the Adviser in processing a claim for class action settlement, which enhanced the Portfolio’s performance for the year ended December 31, 2017 by .01%.
See notes to financial statements.
23
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Growth and Income Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Growth and Income Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
24
| | |
| | |
| | |
| |
| 2020 FEDERAL TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 100% of dividends paid qualify for the dividends received deduction. The Portfolio designates $45,091,707 of dividends paid as long-term capital gain dividends.
25
| | |
| | |
| | |
| |
| GROWTH AND INCOME PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
|
|
|
| | |
| | |
| OFFICERS | | |
Frank V. Caruso(2), Vice President John H. Fogarty(2), Vice President Vinay Thapar(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 (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 Relative Value Investment Team. Messrs. Caruso, Fogarty and Thapar are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
26
| | |
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| |
| MANAGEMENT OF THE FUND | | AB 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 INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| INDEPENDENT DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership, and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
27
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Jorge A. Bermudez,## 69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
| | | | | | | | |
Michael J. Downey,## 77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,## 72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
28
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Jeanette W. Loeb,## 68 (2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen,## 65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody,## 68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
29
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER
PUBLIC COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner,## 81 (2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
30
| | |
| |
| | | AB 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^
60 | | President and Chief
Executive Officer | | See biography above. |
| | | | |
Frank V. Caruso
64 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of US Growth Equities. |
| | | | |
John H. Fogarty
51 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Vinay Thapar
42 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Emilie D. Wrapp
65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes
44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo
61 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke
60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto
56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
31
| | |
| | | |
| | | |
| |
| GROWTH AND INCOME PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
32
| | |
| | | |
| GROWTH AND INCOME PORTFOLIO | | |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Growth and Income Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
33
| | |
| GROWTH AND INCOME PORTFOLIO | | |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors noted that the Fund was not profitable to the Adviser in the periods reviewed.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund to a wholly owned subsidiary of the Adviser. The directors recognized that the Fund’s unprofitability to the Adviser would be exacerbated without these benefits. The directors understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with that for another fund advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the
34
| | |
| |
| | | AB Variable Products Series Fund |
Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
35
VPS-GI-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS SERIES FUND, INC.
| + | | INTERMEDIATE BOND PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| INTERMEDIATE BOND PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Intermediate Bond Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is to generate income and price appreciation without assuming what 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 and 10 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 US dollar-denominated foreign fixed-income securities and may invest up to 25% of its assets in non-US 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-indexed 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 invest, without limit, in derivatives, such as options, futures contracts, forwards and swaps.
INVESTMENT RESULTS
The table on page 4 shows the Portfolio’s performance compared to its benchmark, the Bloomberg Barclays US Aggregate Bond Index, for the one-, five- and 10-year periods ended December 31, 2020.
During the annual period, all share classes of the Portfolio underperformed the benchmark. Security selection was the largest detractor, relative to the benchmark, due to selection in commercial mortgage-backed securities and high-yield corporate bonds that were partially offset by gains within investment-grade corporate bonds. Country allocation to off-benchmark non-US countries including Japan, Sweden and the eurozone also detracted but were partially offset by allocations to South Africa and Canada. Sector allocation contributed, primarily from overweights to investment-grade and high-yield corporate bonds. Duration positioning on the yield-curve added to returns, as gains from overweights to the five- to 10-year parts of the yield curve offset losses from overweights to the 30-year part of the curve and underweights to the 20-year part of the yield curve. Currency decisions did not materially impact performance since contributions from long positions in the euro and Russian ruble were offset by shorts in the New Zealand dollar and Australian dollar.
During the annual period, the Portfolio utilized currency forwards to hedge currency risk and actively manage currency positions. Credit default swaps were utilized in the corporate and commercial mortgage-backed securities sectors for hedging and investment purposes. Treasury futures and interest rate swaps were utilized to manage duration, country exposure and yield-curve positioning. Total return swaps and written swaptions were utilized in the corporate sectors for hedging and investment purposes.
MARKET REVIEW AND INVESTMENT STRATEGY
Global fixed-income market returns were positive yet volatile over the annual period. Central banks and governments enacted an unprecedented amount of monetary and fiscal stimulus to combat market illiquidity and cushion the negative economic impact of COVID-19, setting the stage for a rebound in risk assets following the initial sell-off in March. Government bonds rallied as interest rates were slashed. Risk assets began to rally significantly in November when positive vaccine news extended the credit rally. Developed- and emerging-market investment-grade corporate bonds and commercial mortgage-backed securities led gains as investors searched for higher yields in a period of falling interest rates. Global developed-market high-yield corporate bonds also had strong returns, particularly in the US. Agency mortgage-backed securities, along with emerging-market local-currency debt and high-yield hard-currency sovereign bonds, had positive returns but trailed global treasuries. The US dollar declined against all major developed-market currencies and was mixed against emerging-market currencies. Brent crude oil prices were volatile and fell about 21% due to an uncertain oil industry outlook. Copper prices advanced more than 25%, and gold rose 24% as a perceived inflation hedge.
1
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The Bloomberg Barclays US Aggregate Bond Index is unmanaged and does not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Bloomberg Barclays US Aggregate Bond Index represents the performance of securities within the US 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, including public health crises (including the occurrence of a contagious disease or illness), 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 existing 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 and accrued interest. 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 and negative perceptions of the junk bond market generally, and may be more difficult to trade than other types of securities.
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.
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-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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, and because these investments may be 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.
Mortgage-Related and/or Other Asset-Backed Securities Risk: Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Portfolio to a lower rate of return upon reinvestment of principal.
(Disclosures, Risks and Note About Historical Performance continued on next page)
2
| | |
| | |
| | |
| |
| | | AB Variable Products Series Fund |
Mortgage-backed securities offered by nongovernmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
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.
Illiquid Investments Risk: Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of illiquid investments risk may include low trading volumes, large positions and heavy redemptions of Portfolio shares. Illiquid investments risk may be higher in a rising interest-rate environment, when the value and liquidity of fixed-income securities generally decline.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Active Trading Risk: The Portfolio expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate is expected to exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Portfolio’s return.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARK | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Intermediate Bond Portfolio Class A | | | 5.96% | | | | 4.29% | | | | 3.81% | |
| | | |
| Intermediate Bond Portfolio Class B | | | 5.64% | | | | 4.01% | | | | 3.56% | |
| | | |
| Bloomberg Barclays US Aggregate Bond Index | | | 7.51% | | | | 4.44% | | | | 3.84% | |
1 Average annual returns. | | | | | | | | | | | | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 1.27% and 1.52% for Class A and Class B shares, respectively. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 1.26% and 1.51% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Intermediate Bond Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmark. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on pages 2-3.
4
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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.
| | | | | | | | | | | | | | | | |
| | | Beginning
Account Value
July 1, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,029.80 | | | $ | 6.43 | | | | 1.26 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.80 | | | $ | 6.39 | | | | 1.26 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,028.40 | | | $ | 7.70 | | | | 1.51 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,017.55 | | | $ | 7.66 | | | | 1.51 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
5
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| TOP TEN SECTORS (including derivatives)1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | |
Governments—Treasuries2 | | | 44.4 | % |
Corporates—Investment Grade | | | 34.3 | |
Interest Rate Swaps3 | | | 19.4 | |
Mortgage Pass-Throughs | | | 15.9 | |
Commercial Mortgage-Backed Securities | | | 14.8 | |
Collateralized Mortgage Obligations | | | 11.6 | |
Corporates—Non-Investment Grade | | | 5.6 | |
Inflation-Linked Securities | | | 4.6 | |
Asset-Backed Securities | | | 3.8 | |
Investment Companies | | | 1.8 | |
SECTOR BREAKDOWN (excluding derivatives)4
December 31, 2020 (unaudited)
| | | | |
Corporates—Investment Grade | | | 33.0 | % |
Mortgage Pass-Throughs | | | 15.3 | |
Commercial Mortgage-Backed Securities | | | 14.2 | |
Collateralized Mortgage Obligations | | | 11.2 | |
Governments—Treasuries | | | 9.5 | |
Inflation-Linked Securities | | | 4.5 | |
Corporates—Non-Investment Grade | | | 4.0 | |
Asset-Backed Securities | | | 3.7 | |
Local Governments—US Municipal Bonds | | | 1.4 | |
Governments—Sovereign Bonds | | | 0.6 | |
Emerging Markets—Treasuries | | | 0.5 | |
Emerging Markets—Corporate Bonds | | | 0.2 | |
Quasi-Sovereigns | | | 0.1 | |
Short-Term Investments | | | 1.8 | |
| 1 | | All data are as of December 31, 2020. The Portfolio’s sectors include derivative exposure and are expressed as approximate percentages of the Portfolio’s total net assets, based on the Adviser’s internal classification. The percentages will vary over time. |
| 2 | | Includes Treasury Futures. |
| 3 | | Represents the exposure of the Portfolio’s fixed-rate payments on the Interest Rate Swaps. Interest Rate Swaps involve the exchange by a fund with another party of payments calculated by reference to specified interest rates (e.g., an exchange of floating-rate payments for fixed-rate payments). |
| 4 | | All data are as of December 31, 2020. The Portfolio’s sector breakdown is expressed as a percentage of total investments 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). |
6
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
CORPORATES–INVESTMENT
GRADE–34.3% | |
INDUSTRIAL–19.7% | |
BASIC–1.3% | | | | | | | | | | | | |
Alpek SAB de CV
4.25%, 09/18/2029(a) | | | U.S.$ | | | | 200 | | | $ | 218,562 | |
DuPont de Nemours, Inc. | | | | | | | | | | | | |
4.205%, 11/15/2023 | | | | | | | 65 | | | | 71,770 | |
4.493%, 11/15/2025 | | | | | | | 65 | | | | 75,943 | |
Eastman Chemical Co.
3.80%, 03/15/2025 | | | | | | | 50 | | | | 55,620 | |
Glencore Funding LLC
4.125%, 05/30/2023(a) | | | | | | | 58 | | | | 62,598 | |
Nutrition & Biosciences, Inc.
1.832%, 10/15/2027(a) | | | | | | | 24 | | | | 24,727 | |
Suzano Austria GmbH
3.75%, 01/15/2031 | | | | | | | 17 | | | | 18,020 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 527,240 | |
| | | | | | | | | | | | |
CAPITAL GOODS–0.6% | | | | | | | | | | | | |
General Electric Co.
3.45%, 05/01/2027 | | | | | | | 107 | | | | 120,609 | |
Raytheon Technologies Corp.
3.95%, 08/16/2025 | | | | | | | 90 | | | | 103,191 | |
Westinghouse Air Brake Technologies Corp.
3.20%, 06/15/2025 | | | | | | | 15 | | | | 16,170 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 239,970 | |
| | | | | | | | | | | | |
COMMUNICATIONS–
MEDIA–1.0% | | | | | | | | | |
Charter Communications Operating LLC/Charter Communications Operating Capital
4.20%, 03/15/2028 | | | | | | | 7 | | | | 8,060 | |
4.80%, 03/01/2050 | | | | | | | 15 | | | | 17,815 | |
5.125%, 07/01/2049 | | | | | | | 23 | | | | 28,005 | |
Comcast Corp. | | | | | | | | | | | | |
3.45%, 02/01/2050 | | | | | | | 38 | | | | 44,640 | |
4.15%, 10/15/2028 | | | | | | | 95 | | | | 113,934 | |
Cox Communications, Inc.
2.95%, 06/30/2023(a) | | | | | | | 51 | | | | 53,688 | |
Interpublic Group of Cos., Inc. (The)
4.75%, 03/30/2030 | | | | | | | 55 | | | | 68,467 | |
ViacomCBS, Inc. | | | | | | | | | | | | |
4.20%, 05/19/2032 | | | | | | | 10 | | | | 12,021 | |
4.95%, 01/15/2031 | | | | | | | 22 | | | | 27,605 | |
Walt Disney Co. (The)
2.75%, 09/01/2049 | | | | | | | 44 | | | | 46,367 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 420,602 | |
| | | | | | | | | | | | |
COMMUNICATIONS–
TELECOMMUNICATIONS–0.8% | |
AT&T, Inc. | | | | | | | | | | | | |
2.75%, 06/01/2031 | | | | | | | 33 | | | | 35,262 | |
3.50%, 09/15/2053(a) | | | | | | | 55 | | | | 55,305 | |
3.65%, 09/15/2059(a) | | | | | | | 74 | | | | 74,607 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Vodafone Group PLC
3.75%, 01/16/2024 | | | U.S.$ | | | | 168 | | | $ | 183,661 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 348,835 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
AUTOMOTIVE–1.2% | |
General Motors Co. | | | | | | | | | | | | |
6.125%, 10/01/2025 | | | | | | | 25 | | | | 30,354 | |
6.80%, 10/01/2027 | | | | | | | 34 | | | | 43,736 | |
General Motors Financial Co., Inc. | | | | | | | | | | | | |
2.70%, 08/20/2027 | | | | | | | 60 | | | | 63,437 | |
4.30%, 07/13/2025 | | | | | �� | | 30 | | | | 33,644 | |
5.10%, 01/17/2024 | | | | | | | 109 | | | | 121,965 | |
5.25%, 03/01/2026 | | | | | | | 21 | | | | 24,693 | |
Harley-Davidson Financial Services, Inc.
3.35%, 06/08/2025(a) | | | | | | | 128 | | | | 138,542 | |
Lear Corp. | | | | | | | | | | | | |
3.50%, 05/30/2030 | | | | | | | 36 | | | | 39,335 | |
3.80%, 09/15/2027 | | | | | | | 13 | | | | 14,556 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 510,262 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
OTHER–0.3% | |
Las Vegas Sands Corp. | | | | | | | | | | | | |
2.90%, 06/25/2025 | | | | | | | 63 | | | | 65,987 | |
3.20%, 08/08/2024 | | | | | | | 30 | | | | 31,812 | |
Marriott International, Inc./MD
Series EE
5.75%, 05/01/2025 | | | | | | | 12 | | | | 14,040 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 111,839 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
RETAILERS–0.8% | |
Advance Auto Parts, Inc. | | | | | | | | | | | | |
1.75%, 10/01/2027 | | | | | | | 26 | | | | 26,501 | |
3.90%, 04/15/2030 | | | | | | | 38 | | | | 43,778 | |
AutoNation, Inc.
4.75%, 06/01/2030 | | | | | | | 14 | | | | 16,865 | |
Ralph Lauren Corp.
2.95%, 06/15/2030 | | | | | | | 122 | | | | 132,082 | |
Ross Stores, Inc.
4.70%, 04/15/2027 | | | | | | | 113 | | | | 133,594 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 352,820 | |
| | | | | | | | | | | | |
CONSUMER NON-
CYCLICAL–5.1% | |
AbbVie, Inc. | | | | | | | | | | | | |
2.95%, 11/21/2026 | | | | | | | 67 | | | | 74,196 | |
4.875%, 11/14/2048 | | | | | | | 47 | | | | 63,908 | |
Altria Group, Inc. | | | | | | | | | | | | |
3.40%, 05/06/2030 | | | | | | | 85 | | | | 94,988 | |
4.80%, 02/14/2029 | | | | | | | 26 | | | | 31,175 | |
Anheuser-Busch InBev Worldwide, Inc. | | | | | | | | | | | | |
4.60%, 06/01/2060 | | | | | | | 73 | | | | 93,876 | |
5.55%, 01/23/2049 | | | | | | | 120 | | | | 170,197 | |
Banner Health
1.897%, 01/01/2031 | | | | | | | 30 | | | | 30,414 | |
7
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Baptist Healthcare System Obligated Group
Series 20B
3.54%, 08/15/2050 | | | U.S.$ | | | | 59 | | | $ | 65,787 | |
BAT Capital Corp. | | | | | | | | | | | | |
2.259%, 03/25/2028 | | | | | | | 128 | | | | 132,369 | |
2.726%, 03/25/2031 | | | | | | | 50 | | | | 51,761 | |
4.70%, 04/02/2027 | | | | | | | 55 | | | | 64,852 | |
Biogen, Inc.
4.05%, 09/15/2025 | | | | | | | 144 | | | | 165,008 | |
Cigna Corp. | | | | | |
3.75%, 07/15/2023 | | | | | | | 25 | | | | 27,002 | |
4.125%, 11/15/2025 | | | | | | | 45 | | | | 51,768 | |
4.375%, 10/15/2028 | | | | | | | 58 | | | | 70,026 | |
Coca-Cola Femsa SAB de CV | | | | | |
1.85%, 09/01/2032 | | | | | | | 150 | | | | 149,344 | |
2.75%, 01/22/2030 | | | | | | | 150 | | | | 162,047 | |
CommonSpirit Health
1.547%, 10/01/2025 | | | | | | | 38 | | | | 39,092 | |
CVS Health Corp. | | | | | |
4.30%, 03/25/2028 | | | | | | | 8 | | | | 9,482 | |
5.05%, 03/25/2048 | | | | | | | 49 | | | | 66,249 | |
Royalty Pharma PLC
1.75%, 09/02/2027(a) | | | | | | | 16 | | | | 16,450 | |
Sutter Health Series 20A
2.294%, 08/15/2030 | | | | | | | 84 | | | | 87,557 | |
Takeda Pharmaceutical Co., Ltd.
4.40%, 11/26/2023 | | | | | | | 200 | | | | 221,574 | |
Tyson Foods, Inc. | | | | | |
3.95%, 08/15/2024 | | | | | | | 48 | | | | 53,355 | |
4.00%, 03/01/2026 | | | | | | | 12 | | | | 13,792 | |
Utah Acquisition Sub, Inc.
3.95%, 06/15/2026 | | | | | | | 85 | | | | 97,261 | |
Zimmer Biomet Holdings, Inc.
3.55%, 03/20/2030 | | | | | | | 25 | | | | 28,336 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,131,866 | |
| | | | | | | | | | | | |
ENERGY–5.6% | | | | | |
Baker Hughes a GE Co. LLC/Baker Hughes Co-Obligor, Inc.
3.337%, 12/15/2027 | | | | | | | 58 | | | | 65,155 | |
Boardwalk Pipelines LP
3.40%, 02/15/2031 | | | | | | | 47 | | | | 48,902 | |
BP Capital Markets America, Inc.
3.194%, 04/06/2025 | | | | | | | 81 | | | | 89,093 | |
Cenovus Energy, Inc.
4.25%, 04/15/2027 | | | | | | | 12 | | | | 13,050 | |
Energy Transfer Operating LP | | | | | |
3.75%, 05/15/2030 | | | | | | | 129 | | | | 139,022 | |
4.75%, 01/15/2026 | | | | | | | 175 | | | | 198,175 | |
Enterprise Products Operating LLC
3.70%, 02/15/2026 | | | | | | | 161 | | | | 182,349 | |
Husky Energy, Inc.
4.40%, 04/15/2029 | | | | | | | 161 | | | | 179,243 | |
Kinder Morgan, Inc.
3.15%, 01/15/2023 | | | | | | | 150 | | | | 157,721 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Marathon Oil Corp. | | | | | |
3.85%, 06/01/2025 | | | U.S.$ | | | | 19 | | | $ | 20,362 | |
6.80%, 03/15/2032 | | | | | | | 100 | | | | 123,319 | |
Marathon Petroleum Corp.
5.125%, 12/15/2026 | | | | | | | 30 | | | | 35,780 | |
Noble Energy, Inc. | | | | | | | | | | | | |
3.85%, 01/15/2028 | | | | | | | 30 | | | | 34,741 | |
3.90%, 11/15/2024 | | | | | | | 107 | | | | 118,938 | |
ONEOK, Inc. | | | | | |
4.00%, 07/13/2027 | | | | | | | 87 | | | | 96,906 | |
4.35%, 03/15/2029 | | | | | | | 57 | | | | 64,563 | |
6.35%, 01/15/2031 | | | | | | | 27 | | | | 34,665 | |
Ovintiv Exploration, Inc.
5.625%, 07/01/2024 | | | | | | | 40 | | | | 42,805 | |
Plains All American Pipeline LP/PAA Finance Corp. | | | | | | | | | | | | |
3.55%, 12/15/2029 | | | | | | | 8 | | | | 8,376 | |
3.60%, 11/01/2024 | | | | | | | 68 | | | | 72,613 | |
4.50%, 12/15/2026 | | | | | | | 16 | | | | 17,933 | |
Sabine Pass Liquefaction LLC
5.00%, 03/15/2027 | | | | | | | 80 | | | | 94,415 | |
Saudi Arabian Oil Co.
2.25%, 11/24/2030(a) | | | | | | | 225 | | | | 228,094 | |
Shell International Finance BV
3.25%, 04/06/2050 | | | | | | | 80 | | | | 90,650 | |
TransCanada PipeLines Ltd.
9.875%, 01/01/2021 | | | | | | | 108 | | | | 108,000 | |
Valero Energy Corp.
2.70%, 04/15/2023 | | | | | | | 78 | | | | 81,452 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 2,346,322 | |
| | | | | | | | | | | | |
SERVICES–0.6% | | | | | |
Booking Holdings, Inc.
4.625%, 04/13/2030 | | | | | | | 104 | | | | 128,980 | |
Expedia Group, Inc.
6.25%, 05/01/2025(a) | | | | | | | 2 | | | | 2,319 | |
Mastercard, Inc. | | | | | |
3.30%, 03/26/2027 | | | | | | | 48 | | | | 54,766 | |
3.85%, 03/26/2050 | | | | | | | 50 | | | | 64,625 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 250,690 | |
| | | | | | | | | | | | |
TECHNOLOGY–2.0% | | | | | |
Apple, Inc.
2.40%, 08/20/2050 | | | | | | | 86 | | | | 87,744 | |
Broadcom Corp./Broadcom Cayman Finance Ltd.
3.50%, 01/15/2028 | | | | | | | 21 | | | | 23,114 | |
Broadcom, Inc. | | | | | |
4.11%, 09/15/2028 | | | | | | | 72 | | | | 82,351 | |
4.15%, 11/15/2030 | | | | | | | 126 | | | | 145,693 | |
5.00%, 04/15/2030 | | | | | | | 46 | | | | 55,946 | |
Dell International LLC/EMC Corp.
6.02%, 06/15/2026(a) | | | | | | | 78 | | | | 95,216 | |
Infor, Inc.
1.75%, 07/15/2025(a) | | | | | | | 34 | | | | 35,263 | |
Micron Technology, Inc.
4.185%, 02/15/2027 | | | | | | | 111 | | | | 129,900 | |
8
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
NXP BV/NXP Funding LLC/NXP USA, Inc.
2.70%, 05/01/2025(a) | | | U.S.$ | | | | 17 | | | $ | 18,278 | |
Oracle Corp.
3.60%, 04/01/2050 | | | | | | | 138 | | | | 161,096 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 834,601 | |
| | | | | | | | | | | | |
TRANSPORTATION–
AIRLINES–0.4% | | | | | |
Delta Air Lines, Inc./SkyMiles IP Ltd. | | | | | | | | | | | | |
4.50%, 10/20/2025(a) | | | | | | | 39 | | | | 42,134 | |
4.75%, 10/20/2028(a) | | | | | | | 46 | | | | 50,229 | |
Southwest Airlines Co.
5.25%, 05/04/2025 | | | | | | | 80 | | | | 92,742 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 185,105 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 8,260,152 | |
| | | | | | | | | | | | |
FINANCIAL
INSTITUTIONS–13.2% | | | | | |
BANKING–11.0% | | | | | | | | | | | | |
American Express Co.
Series C
3.501% (LIBOR 3 Month + 3.29%), 03/15/2021(b)(c) | | | | | | | 15 | | | | 14,697 | |
Australia & New Zealand Banking Group Ltd.
4.40%, 05/19/2026(a) | | | | | | | 200 | | | | 230,184 | |
Banco de Credito del Peru
3.125%, 07/01/2030(a) | | | | | | | 87 | | | | 89,393 | |
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand
5.375%, 04/17/2025(a) | | | | | | | 150 | | | | 171,204 | |
Banco Santander SA | | | | | | | | | | | | |
2.749%, 12/03/2030 | | | | | | | 200 | | | | 206,192 | |
3.49%, 05/28/2030 | | | | | | | 200 | | | | 224,340 | |
Bank of America Corp. | | | | | | | | | | | | |
Series DD
6.30%, 03/10/2026(b) | | | | | | | 27 | | | | 31,371 | |
Series L
3.95%, 04/21/2025 | | | | | | | 360 | | | | 405,634 | |
Series Z
6.50%, 10/23/2024(b) | | | | | | | 41 | | | | 46,913 | |
Bank of New York Mellon Corp. (The)
Series G
4.70%, 09/20/2025(b) | | | | | | | 17 | | | | 18,743 | |
Barclays Bank PLC
6.86%, 06/15/2032(a)(b) | | | | | | | 29 | | | | 41,088 | |
BNP Paribas SA
4.375%, 05/12/2026(a) | | | | | | | 200 | | | | 229,732 | |
Capital One Financial Corp. | | | | | | | | | | | | |
2.60%, 05/11/2023 | | | | | | | 68 | | | | 71,269 | |
3.30%, 10/30/2024 | | | | | | | 135 | | | | 148,379 | |
CIT Group, Inc.
5.25%, 03/07/2025 | | | | | | | 56 | | | | 63,922 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Citigroup, Inc. | | | | | | | | | | | | |
4.45%, 09/29/2027 | | | U.S.$ | | | | 83 | | | $ | 98,030 | |
5.95%, 01/30/2023(b) | | | | | | | 55 | | | | 57,818 | |
Series Q
4.316% (LIBOR 3 Month + 4.10%), 02/15/2021(b)(c) | | | | | | | 90 | | | | 89,943 | |
Series R
4.699% (LIBOR 3 Month + 4.48%), 02/15/2021(b)(c) | | | | | | | 39 | | | | 39,053 | |
Series W
4.00%, 12/10/2025(b) | | | | | | | 37 | | | | 38,010 | |
Cooperatieve Rabobank UA
4.375%, 08/04/2025 | | | | | | | 250 | | | | 285,518 | |
Credit Suisse Group AG
3.80%, 06/09/2023 | | | | | | | 265 | | | | 285,426 | |
Fifth Third Bancorp
Series L
4.50%, 09/30/2025(b) | | | | | | | 24 | | | | 25,615 | |
Goldman Sachs Group, Inc. (The)
Series M
4.127% (LIBOR 3 Month + 3.92%), 02/01/2021(b)(c) | | | | | | | 45 | | | | 44,865 | |
HSBC Holdings PLC
4.25%, 08/18/2025 | | | | | | | 203 | | | | 230,295 | |
ING Groep NV
3.55%, 04/09/2024 | | | | | | | 200 | | | | 218,470 | |
JPMorgan Chase & Co. | | | | | | | | | | | | |
2.083%, 04/22/2026 | | | | | | | 67 | | | | 70,715 | |
3.54%, 05/01/2028 | | | | | | | 74 | | | | 84,405 | |
Series Z
4.014% (LIBOR 3 Month + 3.80%), 02/01/2021(b)(c) | | | | | | | 22 | | | | 21,987 | |
Morgan Stanley | | | | | | | | | | | | |
3.591%, 07/22/2028 | | | | | | | 186 | | | | 212,282 | |
3.737%, 04/24/2024 | | | | | | | 75 | | | | 80,690 | |
5.00%, 11/24/2025 | | | | | | | 37 | | | | 44,181 | |
Series J
4.046% (LIBOR 3 Month + 3.81%), 04/15/2021(b)(c) | | | | | | | 20 | | | | 19,955 | |
Santander Holdings USA, Inc.
4.40%, 07/13/2027 | | | | | | | 41 | | | | 46,698 | |
Standard Chartered PLC
1.724% (LIBOR 3 Month + 1.51%), 01/30/2027(a)(b)(c) | | | | | | | 100 | | | | 92,577 | |
State Street Corp.
2.901%, 03/30/2026 | | | | | | | 11 | | | | 11,977 | |
Truist Financial Corp.
Series Q
5.10%, 03/01/2030(b) | | | | | | | 81 | | | | 92,514 | |
US Bancorp
Series J
5.30%, 04/15/2027(b) | | | | | | | 63 | | | | 70,849 | |
Wells Fargo & Co. | | | | | | | | | | | | |
2.188%, 04/30/2026 | | | | | | | 62 | | | | 65,257 | |
3.069%, 01/24/2023 | | | | | | | 113 | | | | 116,172 | |
3.75%, 01/24/2024 | | | | | | | 110 | | | | 120,029 | |
Series G
4.30%, 07/22/2027 | | | | | | | 35 | | | | 41,045 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,597,437 | |
| | | | | | | | | | | | |
9
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
BROKERAGE–0.1% | | | | | | | | | | | | |
Charles Schwab Corp. (The)
Series G
5.375%, 06/01/2025(b) | | | U.S.$ | | | | 44 | | | $ | 48,978 | |
| | | | | | | | | | | | |
FINANCE–1.4% | | | | | | | | | | | | |
Air Lease Corp. | | | | | | | | | | | | |
2.875%, 01/15/2026 | | | | | | | 22 | | | | 23,276 | |
3.625%, 04/01/2027 | | | | | | | 8 | | | | 8,621 | |
3.875%, 07/03/2023 | | | | | | | 6 | | | | 6,393 | |
4.25%, 02/01/2024 | | | | | | | 25 | | | | 27,125 | |
Aircastle Ltd. | | | | | | | | | | | | |
4.125%, 05/01/2024 | | | | | | | 18 | | | | 19,131 | |
4.25%, 06/15/2026 | | | | | | | 4 | | | | 4,237 | |
4.40%, 09/25/2023 | | | | | | | 41 | | | | 43,751 | |
5.00%, 04/01/2023 | | | | | | | 4 | | | | 4,290 | |
5.25%, 08/11/2025(a) | | | | | | | 45 | | | | 49,514 | |
Aviation Capital Group LLC | | | | | | | | | | | | |
2.875%, 01/20/2022(a) | | | | | | | 10 | | | | 10,145 | |
3.50%, 11/01/2027(a) | | | | | | | 17 | | | | 17,024 | |
3.875%, 05/01/2023(a) | | | | | | | 38 | | | | 39,622 | |
4.125%, 08/01/2025(a) | | | | | | | 2 | | | | 2,089 | |
4.375%, 01/30/2024(a) | | | | | | | 14 | | | | 14,773 | |
4.875%, 10/01/2025(a) | | | | | | | 20 | | | | 21,418 | |
5.50%, 12/15/2024(a) | | | | | | | 46 | | | | 50,800 | |
GE Capital European Funding Unlimited Co.
4.625%, 02/22/2027 | | | EUR | | | | 50 | | | | 76,346 | |
Synchrony Financial
4.50%, 07/23/2025 | | | U.S.$ | | | | 147 | | | | 165,441 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 583,996 | |
| | | | | | | | | | | | |
INSURANCE–0.5% | | | | | | | | | | | | |
Alleghany Corp.
3.625%, 05/15/2030 | | | | | | | 95 | | | | 107,521 | |
Centene Corp. | | | | | | | | | | | | |
4.25%, 12/15/2027 | | | | | | | 14 | | | | 14,901 | |
4.625%, 12/15/2029 | | | | | | | 16 | | | | 17,743 | |
Nationwide Mutual Insurance Co.
9.375%, 08/15/2039(a) | | | | | | | 35 | | | | 60,635 | |
Voya Financial, Inc.
5.65%, 05/15/2053 | | | | | | | 31 | | | | 32,748 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 233,548 | |
| | | | | | | | | | | | |
REITS–0.2% | | | | | | | | | | | | |
Host Hotels & Resorts LP
Series D
3.75%, 10/15/2023 | | | | | | | 6 | | | | 6,325 | |
Rexford Industrial Realty LP 2.125%, 12/01/2030 | | | | | | | 72 | | | | 72,289 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 78,614 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 5,542,573 | |
| | | | | | | | | | | | |
UTILITY–1.4% | | | | | | | | | | | | |
ELECTRIC–1.4% | | | | | | | | | | | | |
Colbun SA
3.15%, 03/06/2030(a) | | | | | | | 200 | | | | 215,688 | |
Enel Chile SA
4.875%, 06/12/2028 | | | | | | | 68 | | | | 80,134 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Israel Electric Corp., Ltd.
Series 6
5.00%, 11/12/2024(a) | | | U.S.$ | | | | 200 | | | $ | 225,750 | |
Kentucky Utilities Co.
3.30%, 06/01/2050 | | | | | | | 38 | | | | 43,054 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 564,626 | |
| | | | | | | | | | | | |
Total Corporates–Investment Grade
(cost $13,210,558) | | | | | | | | | | | 14,367,351 | |
| | | | | | | | | | | | |
MORTGAGE PASS-THROUGHS–15.9% | | | | | | | | | | | | |
AGENCY FIXED
RATE 30-YEAR–13.9% | | | | | |
Federal Home Loan Mortgage Corp. | | | | | | | | | | | | |
Series 2019
3.50%,
10/01/2049–11/01/2049 | | | | | | | 222 | | | | 238,983 | |
Series 2020
3.50%, 01/01/2050 | | | | | | | 99 | | | | 108,541 | |
Federal Home Loan Mortgage Corp. Gold | | | | | | | | | | | | |
Series 2005 5.50%, 01/01/2035 | | | | | | | 49 | | | | 56,872 | |
Series 2007 5.50%, 07/01/2035 | | | | | | | 15 | | | | 17,128 | |
Series 2016 4.00%, 02/01/2046 | | | | | | | 139 | | | | 154,350 | |
Series 2017 4.00%, 07/01/2044 | | | | | | | 107 | | | | 118,232 | |
Series 2018
4.00%,
11/01/2048–12/01/2048 | | | | | | | 108 | | | | 117,594 | |
4.50%, 10/01/2048–11/01/2048 | | | | | | | 223 | | | | 244,813 | |
5.00%, 11/01/2048 | | | | | | | 56 | | | | 63,066 | |
Federal National Mortgage Association | | | | | | | | | | | | |
Series 2003
5.50%, 04/01/2033–07/01/2033 | | | | | | | 46 | | | | 52,792 | |
Series 2004
5.50%, 04/01/2034–11/01/2034 | | | | | | | 41 | | | | 47,102 | |
Series 2005
5.50%, 02/01/2035 | | | | | | | 47 | | | | 54,595 | |
Series 2010
4.00%, 12/01/2040 | | | | | | | 64 | | | | 70,464 | |
Series 2012
3.50%, 02/01/2042–01/01/2043 | | | | | | | 184 | | | | 202,935 | |
Series 2013
3.50%, 04/01/2043 | | | | | | | 89 | | | | 98,250 | |
4.00%, 10/01/2043 | | | | | | | 247 | | | | 273,046 | |
Series 2018
3.50%, 04/01/2048–05/01/2048 | | | | | | | 809 | | | | 874,491 | |
4.00%, 08/01/2048–12/01/2048 | | | | | | | 240 | | | | 259,840 | |
4.50%, 09/01/2048 | | | | | | | 206 | | | | 226,868 | |
10
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2019
3.50%,
09/01/2049–11/01/2049 | | | U.S.$ | | | | 379 | | | $ | 408,504 | |
4.00%, 06/01/2049 | | | | | | | 169 | | | | 184,544 | |
Series 2020
3.50%, 01/01/2050 | | | | | | | 95 | | | | 103,336 | |
Government National Mortgage Association | | | | | | | | | | | | |
Series 1994
9.00%, 09/15/2024 | | | | | | | 0 | ** | | | 251 | |
Series 2016
3.00%, 04/20/2046 | | | | | | | 134 | | | | 140,835 | |
Uniform Mortgage-Backed Security | | | | | | | | | | | | |
Series 2021
1.50%, 01/01/2051, TBA | | | | | | | 635 | | | | 641,648 | |
2.00%, 01/01/2051, TBA | | | | | | | 415 | | | | 431,211 | |
2.50%, 01/01/2051, TBA | | | | | | | 610 | | | | 643,073 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 5,833,364 | |
| | | | | | | | | | | | |
AGENCY FIXED RATE 15-YEAR–2.0% | | | | | | | | | | | | |
Federal National Mortgage Association
Series 2016
2.50%, 07/01/2031–01/01/2032 | | | | | | | 778 | | | | 816,350 | |
| | | | | | | | | | | | |
Total Mortgage Pass-Throughs
(cost $6,355,622) | | | | | | | | | | | 6,649,714 | |
| | | | | | | | | | | | |
COMMERCIAL MORTGAGE-
BACKED
SECURITIES–14.7% | | | | | | | | | |
NON-AGENCY FIXED RATE CMBS–11.8% | | | | | | | | | | | | |
BAMLL Commercial Mortgage Securities Trust
Series 2013-WBRK, Class D
3.534%, 03/10/2037(a) | | | | | | | 110 | | | | 98,492 | |
Banc of America Commercial Mortgage Trust
Series 2015-UBS7, Class AS
3.989%, 09/15/2048 | | | | | | | 100 | | | | 110,984 | |
CCUBS Commercial Mortgage Trust
Series 2017-C1, Class A4
3.544%, 11/15/2050 | | | | | | | 155 | | | | 177,327 | |
CFCRE Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2016-C4, Class A4 3.283%, 05/10/2058 | | | | | | | 115 | | | | 124,886 | |
Series 2016-C4, Class AM 3.691%, 05/10/2058 | | | | | | | 45 | | | | 49,393 | |
CGRBS Commercial Mortgage Trust
Series 2013-VN05, Class A
3.369%, 03/13/2035(a) | | | | | | | 260 | | | | 272,868 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Citigroup Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2015-GC27, Class A5 3.137%, 02/10/2048 | | | U.S.$ | | | | 144 | | | $ | 155,787 | |
Series 2015-GC35, Class A4 3.818%, 11/10/2048 | | | | | | | 55 | | | | 62,229 | |
Series 2016-C1, Class A4 3.209%, 05/10/2049 | | | | | | | 192 | | | | 212,650 | |
Series 2016-GC36, Class A5 3.616%, 02/10/2049 | | | | | | | 65 | | | | 73,053 | |
Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2013-SFS, Class A1 1.873%, 04/12/2035(a) | | | | | | | 34 | | | | 34,110 | |
Series 2014-UBS3, Class A4 3.819%, 06/10/2047 | | | | | | | 130 | | | | 142,610 | |
Series 2014-UBS5, Class A4 3.838%, 09/10/2047 | | | | | | | 130 | | | | 143,460 | |
Series 2014-UBS6, Class AM
4.048%, 12/10/2047 | | | | | | | 45 | | | | 49,377 | |
Series 2015-CR24, Class A5 3.696%, 08/10/2048 | | | | | | | 65 | | | | 72,941 | |
Series 2015-DC1, Class A5 3.35%, 02/10/2048 | | | | | | | 80 | | | | 87,648 | |
CSAIL Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2015-C2, Class A4 3.504%, 06/15/2057 | | | | | | | 100 | | | | 110,057 | |
Series 2015-C3, Class A4 3.718%, 08/15/2048 | | | | | | | 117 | | | | 129,663 | |
Series 2015-C4, Class A4 3.808%, 11/15/2048 | | | | | | | 215 | | | | 242,413 | |
GS Mortgage Securities Trust | | | | | | | | | | | | |
Series 2011-GC5, Class D 5.388%, 08/10/2044(a) | | | | | | | 10 | | | | 8,561 | |
Series 2013-G1, Class A2 3.557%, 04/10/2031(a) | | | | | | | 136 | | | | 135,517 | |
Series 2014-GC22, Class A5 3.862%, 06/10/2047 | | | | | | | 77 | | | | 84,605 | |
Series 2015-GC28, Class A5 3.396%, 02/10/2048 | | | | | | | 95 | | | | 103,837 | |
Series 2018-GS9, Class A4 3.992%, 03/10/2051 | | | | | | | 75 | | | | 87,840 | |
JP Morgan Chase Commercial Mortgage Securities Trust | | | | | | | | | | | | |
Series 2012-C6, Class D 5.152%, 05/15/2045 | | | | | | | 110 | | | | 96,641 | |
Series 2012-C6, Class E 5.152%, 05/15/2045(a) | | | | | | | 132 | | | | 78,389 | |
JPMBB Commercial Mortgage Securities Trust | | | | | | | | | | | | |
Series 2014-C21, Class A5 3.775%, 08/15/2047 | | | | | | | 100 | | | | 109,717 | |
Series 2014-C22, Class XA 0.83%, 09/15/2047(d) | | | | | | | 2,507 | | | | 63,757 | |
Series 2014-C24, Class C 4.407%, 11/15/2047 | | | | | | | 110 | | | | 104,066 | |
11
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2015-C30, Class A5 3.822%, 07/15/2048 | | | U.S.$ | | | | 65 | | | $ | 73,395 | |
Series 2015-C31, Class A3 3.801%, 08/15/2048 | | | | | | | 195 | | | | 219,055 | |
LB-UBS Commercial Mortgage Trust
Series 2006-C6, Class AJ
5.492%, 09/15/2039 | | | | | | | 24 | | | | 13,693 | |
LSTAR Commercial Mortgage Trust
Series 2016-4, Class A2
2.579%, 03/10/2049(a) | | | | | | | 141 | | | | 144,074 | |
Morgan Stanley Capital I Trust
Series 2016-UB12, Class A4 3.596%, 12/15/2049 | | | | | | | 100 | | | | 112,629 | |
UBS Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2018-C10, Class A4 4.313%, 05/15/2051 | | | | | | | 125 | | | | 146,796 | |
Series 2018-C8, Class A4 3.983%, 02/15/2051 | | | | | | | 100 | | | | 116,191 | |
Series 2018-C9, Class A4 4.117%, 03/15/2051 | | | | | | | 125 | | | | 146,437 | |
UBS-Barclays Commercial Mortgage Trust
Series 2012-C4, Class A5
2.85%, 12/10/2045 | | | | | | | 112 | | | | 116,178 | |
Wells Fargo Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2015-SG1, Class A4 3.789%, 09/15/2048 | | | | | | | 95 | | | | 105,201 | |
Series 2016-C35, Class XA 1.927%, 07/15/2048(d) | | | | | | | 941 | | | | 74,816 | |
Series 2016-LC25, Class C 4.417%, 12/15/2059 | | | | | | | 85 | | | | 85,078 | |
Series 2016-NXS6, Class C 4.315%, 11/15/2049 | | | | | | | 100 | | | | 98,802 | |
WF-RBS Commercial Mortgage Trust | | | | | | | | | | | | |
Series 2013-C11, Class XA 1.173%, 03/15/2045(a)(d) | | | | | | | 1,224 | | | | 24,373 | |
Series 2014-C19, Class A5 4.101%, 03/15/2047 | | | | | | | 130 | | | | 143,045 | |
Series 2014-C24, Class AS 3.931%, 11/15/2047 | | | | | | | 110 | | | | 113,102 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,955,743 | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING
RATE CMBS–2.9% | | | | | | | | | | | | |
Ashford Hospitality Trust
Series 2018-KEYS, Class A
1.159% (LIBOR 1 Month + 1.00%), 06/15/2035(a)(c) | | | | | | | 100 | | | | 96,948 | |
Atrium Hotel Portfolio Trust
Series 2018-ATRM, Class A
1.109% (LIBOR 1 Month + 0.95%), 06/15/2035(a)(c) | | | | | | | 100 | | | | 97,874 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
BAMLL Commercial Mortgage Securities Trust
Series 2017-SCH, Class AF
1.159% (LIBOR 1 Month + 1.00%), 11/15/2033(a)(c) | | | U.S.$ | | | | 185 | | | $ | 176,942 | |
BBCMS Mortgage Trust
Series 2020-BID, Class A
2.299% (LIBOR 1 Month + 2.14%), 10/15/2037(a)(c) | | | | | | | 71 | | | | 71,022 | |
BHMS
Series 2018-ATLS, Class A
1.409% (LIBOR 1 Month + 1.25%), 07/15/2035(a)(c) | | | | | | | 81 | | | | 78,814 | |
BX Trust
Series 2018-EXCL, Class A 1.246% (LIBOR 1 Month + 1.09%), 09/15/2037(a)(c) | | | | | | | 86 | | | | 79,578 | |
CLNY Trust
Series 2019-IKPR, Class D
2.184% (LIBOR 1 Month + 2.03%), 11/15/2038(a)(c) | | | | | | | 65 | | | | 58,813 | |
DBWF Mortgage Trust
Series 2018-GLKS, Class A
1.182% (LIBOR 1 Month + 1.03%), 12/19/2030(a)(c) | | | | | | | 100 | | | | 98,746 | |
Great Wolf Trust
Series 2019-WOLF, Class A 1.193% (LIBOR 1 Month + 1.03%), 12/15/2036(a)(c) | | | | | | | 111 | | | | 108,495 | |
GS Mortgage Securities Corp. Trust | | | | | | | | | | | | |
Series 2019-BOCA, Class A 1.359% (LIBOR 1 Month + 1.20%), 06/15/2038(a)(c) | | | | | | | 115 | | | | 114,134 | |
Series 2019-SMP, Class A 1.309% (LIBOR 1 Month + 1.15%), 08/15/2032(a)(c) | | | | | | | 100 | | | | 99,383 | |
JP Morgan Chase Commercial Mortgage Securities Trust
Series 2020-NNN, Class EFL
2.003% (LIBOR 1 Month + 1.85%), 01/16/2037(a)(c) | | | | | | | 6 | | | | 5,705 | |
Starwood Retail Property Trust
Series 2014-STAR, Class A
1.629% (LIBOR 1 Month + 1.47%), 11/15/2027(a)(c) | | | | | | | 174 | | | | 114,657 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,201,111 | |
| | | | | | | | | | | | |
Total Commercial Mortgage-Backed Securities
(cost $6,068,421) | | | | | | | | | | | 6,156,854 | |
| | | | | | | | | | | | |
COLLATERALIZED
MORTGAGE
OBLIGATIONS–11.6% | |
RISK SHARE FLOATING
RATE–8.9% | |
Bellemeade Re 2020-4 Ltd.
Series 2020-4A, Class M2A
2.75% (LIBOR 1 Month + 2.60%), 06/25/2030(a)(c) | | | | | | | 150 | | | | 150,100 | |
12
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Bellemeade Re Ltd. | | | | | | | | | | | | |
Series 2018-3A, Class M1B 1.998% (LIBOR 1 Month + 1.85%), 10/25/2028(a)(c) | | | U.S.$ | | | | 82 | | | $ | 81,700 | |
Series 2019-4A, Class M1B 2.148% (LIBOR 1 Month + 2.00%), 10/25/2029(a)(c) | | | | | | | 150 | | | | 149,324 | |
Connecticut Avenue Securities Trust | | | | | | | | | | | | |
Series 2018-R07, Class 1M2 2.548% (LIBOR 1 Month + 2.40%), 04/25/2031(a)(c) | | | | | | | 28 | | | | 27,825 | |
Series 2019-HRP1, Class M2 2.298% (LIBOR 1 Month + 2.15%), 11/25/2039(a)(c) | | | | | | | 85 | | | | 83,719 | |
Series 2019-R02, Class 1M2 | | | | | | | | | | | | |
2.448% (LIBOR 1 Month + 2.30%), 08/25/2031(a)(c) | | | | | | | 38 | | | | 37,527 | |
Series 2019-R03, Class 1M2 2.298% (LIBOR 1 Month + 2.15%), 09/25/2031(a)(c) | | | | | | | 64 | | | | 63,929 | |
Series 2019-R04, Class 2M2 2.248% (LIBOR 1 Month + 2.10%), 06/25/2039(a)(c) | | | | | | | 69 | | | | 68,803 | |
Series 2019-R05, Class 1M2 2.148% (LIBOR 1 Month + 2.00%), 07/25/2039(a)(c) | | | | | | | 59 | | | | 58,996 | |
Series 2019-R06, Class 2M2 2.248% (LIBOR 1 Month + 2.10%), 09/25/2039(a)(c) | | | | | | | 89 | | | | 88,899 | |
Series 2019-R07, Class 1M2 2.248% (LIBOR 1 Month + 2.10%), 10/25/2039(a)(c) | | | | | | | 91 | | | | 90,831 | |
Series 2020-R01, Class 1M2 2.198% (LIBOR 1 Month + 2.05%), 01/25/2040(a)(c) | | | | | | | 130 | | | | 129,311 | |
Series 2020-R02, Class 2M2 2.148% (LIBOR 1 Month + 2.00%), 01/25/2040(a)(c) | | | | | | | 100 | | | | 99,295 | |
Eagle Re Ltd. | | | | | | | | | | | | |
Series 2020-1, Class M1A 1.048% (LIBOR 1 Month + 0.90%), 01/25/2030(a)(c) | | | | | | | 150 | | | | 149,437 | |
Series 2020-2, Class M1B 4.148% (LIBOR 1 Month + 4.00%), 10/25/2030(a)(c) | | | | | | | 150 | | | | 152,135 | |
Federal Home Loan Mortgage Corp. Structured Agency Credit Risk Debt Notes | | | | | | | | | | | | |
Series 2019-DNA3, Class M2
2.198% (LIBOR 1 Month + 2.05%), 07/25/2049(a)(c) | | | | | | | 75 | | | | 74,405 | |
Series 2019-DNA4, Class M2
2.098% (LIBOR 1 Month + 1.95%), 10/25/2049(a)(c) | | | | | | | 92 | | | | 92,230 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2019-FTR2, Class M2 2.298% (LIBOR 1 Month + 2.15%), 11/25/2048(a)(c) | | | U.S.$ | | | | 115 | | | $ | 113,860 | |
Series 2019-HQA1, Class M2
2.498% (LIBOR 1 Month + 2.35%), 02/25/2049(a)(c) | | | | | | | 65 | | | | 64,987 | |
Series 2020-DNA1, Class M2
1.848% (LIBOR 1 Month + 1.70%), 01/25/2050(a)(c) | | | | | | | 110 | | | | 109,173 | |
Series 2020-DNA2, Class M2
1.998% (LIBOR 1 Month + 1.85%), 02/25/2050(a)(c) | | | | | | | 60 | | | | 59,632 | |
Series 2020-DNA5, Class M2
2.882%, 10/25/2050(a)(c) | | | | | | | 70 | | | | 70,894 | |
Federal National Mortgage Association
Series 2017-C02, Class 2M2C
3.798% (LIBOR 1 Month + 3.65%), 09/25/2029(c) | | | | | | | 68 | | | | 68,110 | |
Federal National Mortgage Association Connecticut Avenue Securities | | | | | | | | | | | | |
Series 2014-C04, Class 1M2 5.048% (LIBOR 1 Month + 4.90%), 11/25/2024(c) | | | | | | | 58 | | | | 59,028 | |
Series 2014-C04, Class 2M2 5.148% (LIBOR 1 Month + 5.00%), 11/25/2024(c) | | | | | | | 19 | | | | 19,802 | |
Series 2015-C01, Class 1M2 4.448% (LIBOR 1 Month + 4.30%), 02/25/2025(c) | | | | | | | 43 | | | | 43,346 | |
Series 2015-C01, Class 2M2 4.698% (LIBOR 1 Month + 4.55%), 02/25/2025(c) | | | | | | | 11 | | | | 11,461 | |
Series 2015-C02, Class 1M2 4.148% (LIBOR 1 Month + 4.00%), 05/25/2025(c) | | | | | | | 45 | | | | 45,438 | |
Series 2015-C02, Class 2M2 4.148% (LIBOR 1 Month + 4.00%), 05/25/2025(c) | | | | | | | 26 | | | | 26,285 | |
Series 2015-C03, Class 1M2 5.148% (LIBOR 1 Month + 5.00%), 07/25/2025(c) | | | | | | | 49 | | | | 50,228 | |
Series 2015-C03, Class 2M2 5.148% (LIBOR 1 Month + 5.00%), 07/25/2025(c) | | | | | | | 24 | | | | 24,420 | |
Series 2015-C04, Class 1M2 5.848% (LIBOR 1 Month + 5.70%), 04/25/2028(c) | | | | | | | 67 | | | | 71,428 | |
Series 2016-C01, Class 1M2 6.898% (LIBOR 1 Month + 6.75%), 08/25/2028(c) | | | | | | | 80 | | | | 85,839 | |
13
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Series 2016-C02, Class 1M2 6.148% (LIBOR 1 Month + 6.00%), 09/25/2028(c) | | | U.S.$ | | | | 61 | | | $ | 64,295 | |
Series 2016-C03, Class 2M2 6.048% (LIBOR 1 Month + 5.90%), 10/25/2028(c) | | | | | | | 46 | | | | 48,298 | |
Series 2016-C05, Class 2M2 4.598% (LIBOR 1 Month + 4.45%), 01/25/2029(c) | | | | | | | 52 | | | | 53,990 | |
Series 2016-C06, Class 1M2 4.398% (LIBOR 1 Month + 4.25%), 04/25/2029(c) | | | | | | | 90 | | | | 94,614 | |
Series 2017-C01, Class 1M2 3.698% (LIBOR 1 Month + 3.55%), 07/25/2029(c) | | | | | | | 70 | | | | 72,035 | |
Series 2017-C04, Class 2M2 2.998% (LIBOR 1 Month + 2.85%), 11/25/2029(c) | | | | | | | 39 | | | | 39,087 | |
Oaktown Re V Ltd.
Series 2020-2A, Class M1B
3.748% (LIBOR 1 Month + 3.60%), 10/25/2030(a)(c) | | | | | | | 150 | | | | 151,241 | |
PMT Credit Risk Transfer Trust | | | | | | | | | | | | |
Series 2019-1R, Class A 2.145% (LIBOR 1 Month + 2.00%), 03/27/2024(c)(e) | | | | | | | 57 | | | | 53,848 | |
Series 2019-2R, Class A 2.895% (LIBOR 1 Month + 2.75%), 05/27/2023(c)(e) | | | | | | | 79 | | | | 75,867 | |
Series 2019-3R, Class A 2.845% (LIBOR 1 Month + 2.70%), 10/27/2022(c)(e) | | | | | | | 49 | | | | 48,900 | |
Radnor Re Ltd. | | | | | | | | | | | | |
Series 2020-1, Class M1A 1.098% (LIBOR 1 Month + 0.95%), 02/25/2030(a)(c) | | | | | | | 150 | | | | 149,820 | |
Series 2020-1, Class M2A 2.148% (LIBOR 1 Month + 2.00%), 02/25/2030(a)(c) | | | | | | | 150 | | | | 147,748 | |
STACR Trust
Series 2018-DNA3, Class M2
2.248% (LIBOR 1 Month + 2.10%), 09/25/2048(a)(c) | | | | | | | 31 | | | | 30,229 | |
Traingle Re Ltd.
Series 2020-1, Class M1B
4.048% (LIBOR 1 Month + 3.90%), 10/25/2030(a)(c) | | | | | | | 150 | | | | 151,110 | |
Wells Fargo Credit Risk Transfer Securities Trust | | | | | | | | | | | | |
Series 2015-WF1, Class 1M2
5.398% (LIBOR 1 Month + 5.25%), 11/25/2025(c)(e) | | | | | | | 24 | | | | 23,795 | |
Series 2015-WF1, Class 2M2
5.648% (LIBOR 1 Month + 5.50%), 11/25/2025(c)(e) | | | | | | | 10 | | | | 10,325 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 3,737,599 | |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
AGENCY FLOATING RATE–1.2% | | | | | | | | | | | | |
Federal Home Loan Mortgage Corp. REMICs
Series 4981, Class HS
5.952% (6.10%–LIBOR 1 Month), 06/25/2050(c)(f) | | | U.S.$ | | | | 458 | | | $ | 86,712 | |
Federal National Mortgage Association REMICs | | | | | | | | | | | | |
Series 2011-131, Class ST 6.392% (6.54%–LIBOR 1 Month), 12/25/2041(c)(f) | | | | | | | 112 | | | | 27,023 | |
Series 2015-90, Class SL 6.002% (6.15%–LIBOR 1 Month), 12/25/2045(c)(f) | | | | | | | 223 | | | | 52,885 | |
Series 2016-77, Class DS 5.852% (6.00%–LIBOR 1 Month), 10/25/2046(c)(f) | | | | | | | 190 | | | | 38,474 | |
Series 2017-16, Class SG 5.902% (6.05%–LIBOR 1 Month), 03/25/2047(c)(f) | | | | | | | 213 | | | | 43,447 | |
Series 2017-26, Class TS 5.802% (5.95%–LIBOR 1 Month), 04/25/2047(c)(f) | | | | | | | 217 | | | | 49,802 | |
Series 2017-62, Class AS 6.002% (6.15%–LIBOR 1 Month), 08/25/2047(c)(f) | | | | | | | 216 | | | | 40,890 | |
Series 2017-81, Class SA 6.052% (6.20%–LIBOR 1 Month), 10/25/2047(c)(f) | | | | | | | 222 | | | | 49,814 | |
Series 2017-97, Class LS 6.052% (6.20%–LIBOR 1 Month), 12/25/2047(c)(f) | | | | | | | 235 | | | | 58,247 | |
Government National Mortgage Association | | | | | | | | | | | | |
Series 2017-134, Class SE 6.048% (6.20%–LIBOR 1 Month), 09/20/2047(c)(f) | | | | | | | 163 | | | | 28,037 | |
Series 2017-65, Class ST 5.998% (6.15%–LIBOR 1 Month), 04/20/2047(c)(f) | | | | | | | 203 | | | | 43,312 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 518,643 | |
| | | | | | | | | | | | |
AGENCY FIXED RATE–0.7% | | | | | | | | | |
Federal Home Loan Mortgage Corp.
Series 5049, Class CI
3.50%, 12/25/2050(d) | | | | | | | 268 | | | | 34,203 | |
Federal Home Loan Mortgage Corp. REMICs | | | | | | | | | | | | |
Series 4976, Class MI 4.50%, 05/25/2050(d) | | | | | | | 331 | | | | 52,733 | |
Series 5015, Class BI
4.00%, 09/25/2050(d) | | | | | | | 245 | | | | 39,943 | |
Series 5018, Class EI
4.00%, 10/25/2050(d) | | | | | | | 205 | | | | 28,678 | |
Federal National Mortgage Association Grantor Trust
Series 2004-T5, Class AB4
0.69%, 05/28/2035 | | | | | | | 50 | | | | 47,482 | |
14
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
Federal National Mortgage Association REMICs
Series 2020-89, Class KI
4.00%, 12/25/2050(d) | | | U.S.$ | | | | 518 | | | $ | 80,877 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 283,916 | |
| | | | | | | | | | | | |
NON-AGENCY FIXED RATE–0.6% | | | | | | | | | | | | |
Alternative Loan Trust | | | | | | | | | | | | |
Series 2005-20CB, Class 3A6
5.50%, 07/25/2035 | | | | | | | 12 | | | | 11,296 | |
Series 2006-24CB, Class A16
5.75%, 08/25/2036 | | | | | | | 54 | | | | 43,011 | |
Series 2006-28CB, Class A14
6.25%, 10/25/2036 | | | | | | | 39 | | | | 28,818 | |
Series 2006-J1, Class 1A13 5.50%, 02/25/2036 | | | | | | | 26 | | | | 23,780 | |
Chase Mortgage Finance Trust
Series 2007-S5, Class 1A17
6.00%, 07/25/2037 | | | | | | | 19 | | | | 13,274 | |
Countrywide Home Loan Mortgage Pass-Through Trust | | | | | | | | | | | | |
Series 2006-10, Class 1A8 6.00%, 05/25/2036 | | | | | | | 25 | | | | 18,685 | |
Series 2006-13, Class 1A19 6.25%, 09/25/2036 | | | | | | | 12 | | | | 8,162 | |
First Horizon Alternative Mortgage Securities Trust
Series 2006-FA3, Class A9
6.00%, 07/25/2036 | | | | | | | 41 | | | | 28,013 | |
JP Morgan Alternative Loan Trust
Series 2006-A3, Class 2A1
3.649%, 07/25/2036 | | | | | | | 84 | | | | 71,062 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 246,101 | |
| | | | | | | | | | | | |
NON-AGENCY FLOATING RATE–0.2% | | | | | | | | | | | | |
Deutsche Alt-A Securities Mortgage Loan Trust
Series 2006-AR4, Class A2
0.528% (LIBOR 1 Month + 0.19%), 12/25/2036(c) | | | | | | | 107 | | | | 53,942 | |
HomeBanc Mortgage Trust
Series 2005-1, Class A1
0.648% (LIBOR 1 Month + 0.25%), 03/25/2035(c) | | | | | | | 26 | | | | 23,556 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 77,498 | |
| | | | | | | | | | | | |
Total Collateralized Mortgage Obligations
(cost $4,912,855) | | | | | | | | | | | 4,863,757 | |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
GOVERNMENTS–
TREASURIES–9.9% | | | | | | | | | | | | |
MALAYSIA–0.3% | |
Malaysia Government Bond
Series 117
3.882%, 03/10/2022 | | | MYR | | | | 474 | | | $ | 120,606 | |
| | | | | | | | | | | | |
UNITED STATES–9.6% | | | | | | | | | | | | |
U.S. Treasury Bonds | | | | | | | | | | | | |
1.25%, 05/15/2050 | | | U.S.$ | | | | 740 | | | | 671,666 | |
1.375%, 08/15/2050 | | | | | | | 55 | | | | 51,502 | |
1.625%, 11/15/2050 | | | | | | | 120 | | | | 119,512 | |
U.S. Treasury Notes | | | | | | | | | | | | |
0.125%, 08/31/2022–10/31/2022 | | | | | | | 1,797 | | | | 1,797,000 | |
0.375%, 04/30/2025(g) | | | | | | | 537 | | | | 538,930 | |
0.625%,
05/15/2030–08/15/2030 | | | | | | | 223 | | | | 217,696 | |
0.875%, 11/15/2030 | | | | | | | 218 | | | | 217,251 | |
1.50%, 02/15/2030 | | | | | | | 384 | | | | 406,320 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 4,019,877 | |
| | | | | | | | | | | | |
Total Governments–Treasuries
(cost $4,154,169) | | | | | | | | | | | 4,140,483 | |
| | | | | | | | | | | | |
INFLATION-LINKED
SECURITIES–4.6% | | | | | | | | | | | | |
CANADA–0.2% | | | | | | | | | | | | |
Canadian Government Real Return Bond
0.50%, 12/01/2050 | | | CAD | | | | 85 | | | | 83,113 | |
| | | | | | | | | | | | |
JAPAN–1.4% | | | | | | | | | | | | |
Japanese Government CPI Linked Bond Series 22
0.10%, 03/10/2027 | | | JPY | | | | 60,394 | | | | 587,840 | |
| | | | | | | | | | | | |
UNITED STATES–3.0% | | | | | | | | | | | | |
U.S. Treasury Inflation Index | | | | | | | | | | | | |
0.125%, 07/15/2026 (TIPS) | | | U.S.$ | | | | 381 | | | | 419,298 | |
0.375%, 07/15/2025 (TIPS) | | | | | | | 671 | | | | 736,346 | |
0.75%, 07/15/2028 (TIPS) | | | | | | | 93 | | | | 108,617 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,264,261 | |
| | | | | | | | | | | | |
Total Inflation-Linked Securities
(cost $1,780,469) | | | | | | | | | | | 1,935,214 | |
| | | | | | | | | | | | |
CORPORATES–NON-INVESTMENT
GRADE–4.2% | | | | | | | | | | | | |
INDUSTRIAL–2.7% | | | | | | | | | | | | |
BASIC–0.3% | | | | | | | | | | | | |
Ingevity Corp.
3.875%, 11/01/2028(a) | | | | | | | 65 | | | | 65,319 | |
Sealed Air Corp.
4.00%, 12/01/2027(a) | | | | | | | 47 | | | | 50,166 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 115,485 | |
| | | | | | | | | | | | |
CAPITAL GOODS–0.3% | | | | | | | | | | | | |
GFL Environmental, Inc.
3.50%, 09/01/2028(a) | | | | | | | 82 | | | | 83,458 | |
TransDigm, Inc.
6.25%, 03/15/2026(a) | | | | | | | 50 | | | | 53,282 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 136,740 | |
| | | | | | | | | | | | |
15
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
COMMUNICATIONS–
MEDIA–0.2% | | | | | | | | | | | | |
Cable One, Inc.
4.00%, 11/15/2030(a) | | | U.S.$ | | | | 37 | | | $ | 38,466 | |
CSC Holdings LLC
6.75%, 11/15/2021 | | | | | | | 30 | | | | 31,211 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 69,677 | |
| | | | | | | | | | | | |
COMMUNICATIONS–
TELECOMMUNICATIONS–0.2% | | | | | |
CenturyLink, Inc.
4.50%, 01/15/2029(a) | | | | | | | 71 | | | | 72,235 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
AUTOMOTIVE–0.3% | | | | | | | | | | | | |
Allison Transmission, Inc.
3.75%, 01/30/2031(a) | | | | | | | 110 | | | | 112,530 | |
Clarios Global LP/Clarios US Finance Co.
6.25%, 05/15/2026(a) | | | | | | | 20 | | | | 21,456 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 133,986 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
ENTERTAINMENT–0.3% | | | | | | | | | | | | |
Royal Caribbean Cruises Ltd. | | | | | | | | | | | | |
10.875%, 06/01/2023(a) | | | | | | | 43 | | | | 48,892 | |
11.50%, 06/01/2025(a) | | | | | | | 73 | | | | 85,380 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 134,272 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
OTHER–0.2% | | | | | | | | | |
Hilton Domestic Operating Co., Inc.
4.00%, 05/01/2031(a) | | | | | | | 100 | | | | 105,452 | |
| | | | | | | | | | | | |
CONSUMER CYCLICAL–
RESTAURANTS–0.2% | | | | | | | | | | | | |
1011778 BC ULC/New Red Finance, Inc.
3.50%, 02/15/2029(a) | | | | | | | 77 | | | | 77,177 | |
| | | | | | | | | | | | |
CONSUMER NON-CYCLICAL–0.4% | | | | | | | | | | | | |
Albertsons Cos., Inc./Safeway, Inc./New Albertsons LP/Albertsons LLC
3.50%, 03/15/2029(a) | | | | | | | 81 | | | | 81,916 | |
Spectrum Brands, Inc.
5.75%, 07/15/2025 | | | | | | | 69 | | | | 71,241 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 153,157 | |
| | | | | | | | | | | | |
ENERGY–0.1% | | | | | | | | | |
Transocean Poseidon Ltd.
6.875%, 02/01/2027(a) | | | | | | | 33 | | | | 30,009 | |
| | | | | | | | | | | | |
OTHER INDUSTRIAL–0.2% | | | | | | | | | | | | |
H&E Equipment Services, Inc.
3.875%, 12/15/2028(a) | | | | | | | 83 | | | | 83,867 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 1,112,057 | |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
FINANCIAL INSTITUTIONS–1.5% | | | | | | | | | | | | |
BANKING–0.9% | | | | | | | | | | | | |
Credit Suisse Group AG
7.50%, 07/17/2023(a)(b) | | | U.S.$ | | | | 200 | | | $ | 217,696 | |
Discover Financial Services
Series D
6.125%, 06/23/2025(b) | | | | | | | 127 | | | | 143,301 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 360,997 | |
| | | | | | | | | | | | |
FINANCE–0.4% | | | | | | | | | | | | |
Navient Corp.
6.625%, 07/26/2021 | | | | | | | 95 | | | | 97,308 | |
SLM Corp.
4.20%, 10/29/2025 | | | | | | | 68 | | | | 71,892 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 169,200 | |
| | | | | | | | | | | | |
INSURANCE–0.2% | | | | | | | | | | | | |
Molina Healthcare, Inc.
3.875%, 11/15/2030(a) | | | | | | | 93 | | | | 99,751 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 629,948 | |
| | | | | | | | | | | | |
Total Corporates–Non-Investment Grade
(cost $1,660,904) | | | | | | | | | | | 1,742,005 | |
| | | | | | | | | | | | |
ASSET-BACKED SECURITIES–3.9% | |
AUTOS–FIXED RATE–1.9% | | | | | | | | | | | | |
Avis Budget Rental Car Funding AESOP LLC | | | | | | | | | | | | |
Series 2016-1A, Class A 2.99%, 06/20/2022(a) | | | | | | | 100 | | | | 100,558 | |
Series 2018-2A, Class A 4.00%, 03/20/2025(a) | | | | | | | 105 | | | | 113,768 | |
Exeter Automobile Receivables Trust | | | | | | | | | | | | |
Series 2016-3A, Class D 6.40%, 07/17/2023(a) | | | | | | | 100 | | | | 102,044 | |
Series 2017-1A, Class D 6.20%, 11/15/2023(a) | | | | | | | 100 | | | | 103,377 | |
Series 2017-3A, Class C 3.68%, 07/17/2023(a) | | | | | | | 60 | | | | 61,342 | |
First Investors Auto Owner Trust
Series 2020-1A, Class A
1.49%, 01/15/2025(a) | | | | | | | 39 | | | | 38,807 | |
Flagship Credit Auto Trust | | | | | | | | | | | | |
Series 2016-4, Class D 3.89%, 11/15/2022(a) | | | | | | | 125 | | | | 126,901 | |
Series 2018-3, Class B 3.59%, 12/16/2024(a) | | | | | | | 75 | | | | 76,269 | |
Hertz Vehicle Financing II LP | | | | | | | | | | | | |
Series 2017-1A, Class A 2.96%, 10/25/2021(a) | | | | | | | 29 | | | | 28,537 | |
Series 2019-1A, Class A 3.71%, 03/25/2023(a) | | | | | | | 23 | | | | 22,901 | |
Hertz Vehicle Financing LLC
Series 2018-2A, Class A
3.65%, 06/27/2022(a) | | | | | | | 29 | | | | 28,595 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 803,099 | |
| | | | | | | | | | | | |
16
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
OTHER ABS–
FIXED RATE–1.2% | | | | | | | | | |
Affirm Asset Securitization Trust
Series 2020-A, Class A
2.10%, 02/18/2025(a) | | | U.S.$ | | | | 100 | | | $ | 100,570 | |
Hardee’s Funding LLC | | | | | | | | | | | | |
Series 2018-1A, Class A23 5.71%, 06/20/2048(a) | | | | | | | 37 | | | | 40,025 | |
Series 2020-1A, Class A2 3.981%, 12/20/2050(a) | | | | | | | 85 | | | | 87,470 | |
Marlette Funding Trust | | | | | | | | | | | | |
Series 2018-4A, Class A 3.71%, 12/15/2028(a) | | | | | | | 5 | | | | 5,014 | |
Series 2019-3A, Class A 2.69%, 09/17/2029(a) | | | | | | | 27 | | | | 27,602 | |
Series 2020-1A, Class A 2.24%, 03/15/2030(a) | | | | | | | 83 | | | | 83,684 | |
SoFi Consumer Loan Program LLC | | | | | | | | | | | | |
Series 2017-3, Class A 2.77%, 05/25/2026(a) | | | | | | | 4 | | | | 3,781 | |
Series 2017-4, Class B 3.59%, 05/26/2026(a) | | | | | | | 130 | | | | 132,365 | |
Series 2017-5, Class A2 2.78%, 09/25/2026(a) | | | | | | | 27 | | | | 27,400 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 507,911 | |
| | | | | | | | | | | | |
CREDIT CARDS–FIXED RATE–0.7% | | | | | | | | | | | | |
World Financial Network Credit Card Master Trust | | | | | | | | | | | | |
Series 2018-A, Class A 3.07%, 12/16/2024 | | | | | | | 130 | | | | 130,421 | |
Series 2018-B, Class M 3.81%, 07/15/2025 | | | | | | | 70 | | | | 70,756 | |
Series 2019-B, Class M 3.04%, 04/15/2026 | | | | | | | 80 | | | | 82,448 | |
| | | | | | | | | | | | |
| | | | | | | | | | | 283,625 | |
| | | | | | | | | | | | |
HOME EQUITY LOANS–
FLOATING RATE–0.1% | | | | | | | | | | | | |
ABFC Trust
Series 2003-WF1, Class A2 1.273% (LIBOR 1 Month + 1.13%), 12/25/2032(c) | | | | | | | 14 | | | | 13,978 | |
| | | | | | | | | | | | |
Total Asset-Backed Securities (cost $1,581,458) | | | | | | | | | | | 1,608,613 | |
| | | | | | | | | | | | |
LOCAL GOVERNMENTS–US MUNICIPAL
BONDS– 1.4% | | | | | | | | | | | | |
UNITED STATES–1.4% | | | | | | | | | | | | |
Port Authority of New York & New Jersey | | | | | | | | | | | | |
Series 2020A
1.086%, 07/01/2023 | | | | | | | 50 | | | | 50,745 | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | | | | | |
State Board of Administration Finance Corp. | | | | | | | | | | | | |
Series 2020A
1.705%, 07/01/2027 | | | U.S.$ | | | | 80 | | | $ | 83,039 | |
State of California | | | | | | | | | | | | |
5.70%, 11/01/2021 | | | | | | | 65 | | | | 67,933 | |
Series 2010
7.625%, 03/01/2040 | | | | | | | 200 | | | | 347,106 | |
Tobacco Settlement Finance Authority/WV | | | | | | | | | | | | |
3.00%, 06/01/2035 | | | | | | | 55 | | | | 55,381 | |
| | | | | | | | | | | | |
Total Local Governments–US Municipal Bonds
(cost $455,660) | | | | | | | | | | | 604,204 | |
| | | | | | | | | | | | |
GOVERNMENTS–SOVEREIGN
BONDS–0.6% | | | | | | | | | | | | |
MEXICO–0.5% | | | | | | | | | | | | |
Mexico Government International Bond 3.90%, 04/27/2025 | | | | | | | 210 | | | | 236,237 | |
| | | | | | | | | | | | |
URUGUAY–0.1% | | | | | | | | | | | | |
Uruguay Government International Bond
4.375%, 01/23/2031 | | | | | | | 18 | | | | 22,238 | |
| | | | | | | | | | | | |
Total Governments–
Sovereign Bonds
(cost $229,038) | | | | | | | | | | | 258,475 | |
| | | | | | | | | | | | |
EMERGING MARKETS–
TREASURIES–0.5% | | | | | | | | | | | | |
SOUTH AFRICA–0.5% | | | | | | | | | | | | |
Republic of South Africa Government Bond
Series 2030
8.00%, 01/31/2030
(cost $148,546) | | | ZAR | | | | 3,137 | | | | 203,561 | |
| | | | | | | | | | | | |
EMERGING MARKETS–
CORPORATE
BONDS–0.2% | | | | | | | | | | | | |
INDUSTRIAL–0.2% | | | | | | | | | | | | |
CAPITAL GOODS–0.2% | | | | | | | | | | | | |
Embraer Netherlands Finance BV
5.40%, 02/01/2027 | | | U.S.$ | | | | 85 | | | | 90,153 | |
| | | | | | | | | | | | |
UTILITY–0.0% | | | | | | | | | | | | |
ELECTRIC–0.0% | | | | | | | | | | | | |
Terraform Global Operating LLC
6.125%, 03/01/2026(e) | | | | | | | 5 | | | | 5,134 | |
| | | | | | | | | | | | |
Total Emerging Markets–
Corporate Bonds
(cost $90,117) | | | | | | | | | | | 95,287 | |
| | | | | | | | | | | | |
17
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | |
QUASI-SOVEREIGNS–0.2% | | | | | | | | | |
QUASI-SOVEREIGN BONDS–0.2% | | | | | | | | | | | | |
MEXICO–0.2% | | | | | | | | | | | | |
Petroleos Mexicanos | | | | | | | | | | | | |
6.75%, 09/21/2047 | | | U.S.$ | | | | 50 | | | $ | 46,875 | |
6.84%, 01/23/2030 | | | | | | | 17 | | | | 17,697 | |
| | | | | | | | | | | | |
Total Quasi-Sovereigns
(cost $60,923) | | | | | | | | | | | 64,572 | |
| | | | | | | | | | | | |
| | | Shares | | | | |
SHORT-TERM
INVESTMENTS–1.9% | | | | | | | | | |
INVESTMENT COMPANIES–1.8% | | | | | | | | | | | | |
AB Fixed Income Shares, Inc.–
Government Money Market Portfolio–Class AB, 0.03%(h)(i)(j)
(cost $765,463) | | | | | | | 765,463 | | | | 765,463 | |
| | | | | | | | | | | | |
| | |
Principal
Amount
(000) | | | U.S. $ Value | |
| | | | | | | | |
SHORT-TERM MUNICIPAL
NOTES–0.1% | |
NEW YORK–0.1% | | | | | | | | | | | | |
New York State Dormitory Authority
(State of New York Pers Income Tax) | | | | | | | | | | | | |
Series 2020B
5.00%, 03/31/2021
(cost $20,217) | | | U.S.$ | | | | 20 | | | $ | 20,235 | |
| | | | | | | | | | | | |
Total Short-Term Investments
(cost $785,680) | | | | | | | | | | | 785,698 | |
| | | | | | | | | | | | |
TOTAL
INVESTMENTS–103.9%
(cost $41,494,420) | | | | | | | | | | | 43,475,788 | |
Other assets less
liabilities–(3.9)% | | | | | | | | | | | (1,637,387 | ) |
| | | | | | | | | | | | |
NET ASSETS–100.0% | | | | | | | | | | $ | 41,838,401 | |
| | | | | | | | | | | | |
FUTURES (see Note D)
| | | | | | | | | | | | | | | | |
| Description | | Number of
Contracts | | | Expiration
Month | | | Current
Notional | | | Value and
Unrealized
Appreciation/
(Depreciation) | |
Purchased Contracts | |
Euro-Bund Futures | | | 3 | | | | March 2021 | | | $ | 651,042 | | | $ | 1,902 | |
U.S. 10 Yr Ultra Futures | | | 6 | | | | March 2021 | | | | 938,156 | | | | (3,102 | ) |
U.S. T-Note 2 Yr (CBT) Futures | | | 71 | | | | March 2021 | | | | 15,689,336 | | | | 13,111 | |
U.S. Ultra Bond (CBT) Futures | | | 17 | | | | March 2021 | | | | 3,630,562 | | | | (63,525 | ) |
| | | | |
Sold Contracts | | | | | | | | | | | | | | | | |
10 Yr Canadian Bond Futures | | | 2 | | | | March 2021 | | | | 234,268 | | | | (914 | ) |
10 Yr Mini Japan Government Bond Futures | | | 5 | | | | March 2021 | | | | 735,267 | | | | 1,040 | |
Euro Buxl 30 Yr Bond Futures | | | 4 | | | | March 2021 | | | | 1,100,658 | | | | (7,432 | ) |
U.S. T-Note 5 Yr (CBT) Futures | | | 37 | | | | March 2021 | | | | 4,668,070 | | | | (10,757 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | $ | (69,677) | |
| | | | | | | | | | | | | | | | |
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 | | | RUB | | | | 2,169 | | | | USD | | | | 29 | | | | 01/22/2021 | | | $ | 74 | |
Barclays Bank PLC | | | USD | | | | 105 | | | | IDR | | | | 1,475,444 | | | | 01/15/2021 | | | | 1,427 | |
Barclays Bank PLC | | | RUB | | | | 61,149 | | | | USD | | | | 829 | | | | 01/22/2021 | | | | 2,889 | |
Barclays Bank PLC | | | CAD | | | | 1,281 | | | | USD | | | | 1,000 | | | | 02/18/2021 | | | | (5,906 | ) |
Citibank, NA | | | USD | | | | 890 | | | | KRW | | | | 1,011,963 | | | | 01/14/2021 | | | | 40,560 | |
Citibank, NA | | | USD | | | | 3 | | | | CNY | | | | 23 | | | | 02/10/2021 | | | | 12 | |
Goldman Sachs Bank USA | | | USD | | | | 846 | | | | AUD | | | | 1,200 | | | | 01/12/2021 | | | | 79,470 | |
18
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
HSBC Bank USA | | | BRL | | | | 530 | | | | USD | | | | 102 | | | | 01/05/2021 | | | $ | (49 | ) |
HSBC Bank USA | | | USD | | | | 104 | | | | BRL | | | | 530 | | | | 01/05/2021 | | | | (1,863 | ) |
HSBC Bank USA | | | USD | | | | 844 | | | | RUB | | | | 65,092 | | | | 01/22/2021 | | | | 34,838 | |
JPMorgan Chase Bank, NA | | | RUB | | | | 1,561 | | | | USD | | | | 21 | | | | 01/22/2021 | | | | (412 | ) |
Morgan Stanley & Co., Inc. | | | AUD | | | | 2,396 | | | | USD | | | | 1,711 | | | | 01/12/2021 | | | | (136,978 | ) |
Morgan Stanley & Co., Inc. | | | MYR | | | | 497 | | | | USD | | | | 119 | | | | 03/25/2021 | | | | (4,881 | ) |
Morgan Stanley Capital Services, Inc. | | | NZD | | | | 1,186 | | | | USD | | | | 845 | | | | 03/05/2021 | | | | (8,007 | ) |
Standard Chartered Bank | | | KRW | | | | 1,019,227 | | | | USD | | | | 914 | | | | 01/14/2021 | | | | (23,156 | ) |
State Street Bank & Trust Co. | | | USD | | | | 68 | | | | AUD | | | | 92 | | | | 01/12/2021 | | | | 3,054 | |
State Street Bank & Trust Co. | | | USD | | | | 1 | | | | SEK | | | | 5 | | | | 01/15/2021 | | | | 43 | |
State Street Bank & Trust Co. | | | USD | | | | 101 | | | | BRL | | | | 530 | | | | 02/02/2021 | | | | 1,201 | |
State Street Bank & Trust Co. | | | USD | | | | 228 | | | | ZAR | | | | 3,399 | | | | 02/04/2021 | | | | 2,063 | |
State Street Bank & Trust Co. | | | USD | | | | 35 | | | | ZAR | | | | 514 | | | | 02/04/2021 | | | | (265 | ) |
State Street Bank & Trust Co. | | | ZAR | | | | 5,414 | | | | USD | | | | 350 | | | | 02/04/2021 | | | | (17,321 | ) |
State Street Bank & Trust Co. | | | USD | | | | 104 | | | | MXN | | | | 2,066 | | | | 02/25/2021 | | | | (483 | ) |
State Street Bank & Trust Co. | | | USD | | | | 241 | | | | JPY | | | | 25,066 | | | | 02/26/2021 | | | | 2,043 | |
State Street Bank & Trust Co. | | | EUR | | | | 24 | | | | USD | | | | 30 | | | | 03/17/2021 | | | | 154 | |
State Street Bank & Trust Co. | | | USD | | | | 23 | | | | EUR | | | | 19 | | | | 03/17/2021 | | | | 119 | |
UBS AG | | | USD | | | | 1,535 | | | | EUR | | | | 1,256 | | | | 03/17/2021 | | | | 2,607 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (28,767) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
CENTRALLY CLEARED CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Description | | Fixed
Rate
(Pay)
Receive | | | Payment
Frequency | | | Implied
Credit
Spread at
December 31,
2020 | | | Notional
Amount
(000) | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Sale Contracts | |
CDX-NAHY Series 33, 5 Year Index, 12/20/2024* | | | 5.00 | % | | | Quarterly | | | | 2.52 | % | | | USD | | | | 352 | | | $ | 33,015 | | | $ | (32,784) | | | $ | 65,799 | |
CDX-NAHY Series 34, 5 Year Index, 06/20/2025* | | | 5.00 | | | | Quarterly | | | | 2.75 | | | | USD | | | | 178 | | | | 16,834 | | | | 8,946 | | | | 7,888 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | 49,849 | | | $ | (23,838) | | | $ | 73,687 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CENTRALLY CLEARED INTEREST RATE SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Rate Type | | | | | | | | | | | |
Notional
Amount (000) | | | Termination
Date | | | Payments
received
by the
Fund | | Payments
made
by the
Fund | | Payment
Frequency
Paid/
Received | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
CAD | | | 3,550 | | | | 08/27/2021 | | | 3 Month CDOR | | 1.623% | | Semi-Annual/
Semi-Annual | | $ | 31,540 | | | $ | 8 | | | $ | 31,532 | |
SEK | | | 15,600 | | | | 08/30/2024 | | | 3 Month STIBOR | | (0.165)% | | Quarterly/
Annual | | | (14,870 | ) | | | 10 | | | | (14,880 | ) |
CAD | | | 4,900 | | | | 08/07/2025 | | | 3 Month CDOR | | 0.698% | | Semi-Annual/
Semi-Annual | | | (9,377 | ) | | | (47 | ) | | | (9,330 | ) |
19
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Rate Type | | | | | | | | | | | |
Notional
Amount (000) | | | Termination
Date | | | Payments
received
by the
Fund | | Payments
made
by the
Fund | | Payment
Frequency
Paid/
Received | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
USD | | | 130 | | | | 09/27/2029 | | | 1.593% | | 3 Month LIBOR | | Semi-Annual/
Quarterly | | $ | (9,015 | ) | | $ | –0 | – | | $ | (9,015 | ) |
USD | | | 250 | | | | 12/13/2029 | | | 1.764% | | 3 Month LIBOR | | Semi-Annual/
Quarterly | | | (20,218 | ) | | | –0 | – | | | (20,218 | ) |
EUR | | | 290 | | | | 11/10/2050 | | | 6 Month EURIBOR | | (0.043)% | | Semi-Annual/
Annual | | | (2,277 | ) | | | –0 | – | | | (2,277 | ) |
EUR | | | 290 | | | | 11/10/2050 | | | 0.022% | | 6 Month EURIBOR | | Annual/
Semi-Annual | | | (4,747 | ) | | | 2,252 | | | | (6,999 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | $ | (28,964) | | | $ | 2,223 | | | $ | (31,187) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
CREDIT DEFAULT SWAPS (see Note D)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty &
Referenced Obligation | | Fixed
Rate
(Pay)
Receive | | | Payment
Frequency | | | Implied
Credit
Spread at
December 31,
2020 | | | Notional
Amount
(000) | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Buy Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | )% | | | Monthly | | | | 5.87 | % | | | USD | | | | 54 | | | $ | 6,399 | | | $ | 10,939 | | | $ | (4,540 | ) |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 54 | | | | 6,398 | | | | 10,930 | | | | (4,532 | ) |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 595 | | | | 70,498 | | | | 121,317 | | | | (50,819 | ) |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 298 | | | | 35,333 | | | | 59,636 | | | | (24,303 | ) |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 119 | | | | 14,110 | | | | 23,600 | | | | (9,490 | ) |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 128 | | | | 15,145 | | | | 26,264 | | | | (11,119 | ) |
Goldman Sachs International | |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 51 | | | | 6,043 | | | | 8,904 | | | | (2,861 | ) |
JPMorgan Securities, LLC | |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 68 | | | | 8,046 | | | | 13,809 | | | | (5,763 | ) |
Morgan Stanley & Co. International PLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 54 | | | | 6,398 | | | | 11,095 | | | | (4,697 | ) |
CDX-CMBX.NA.BBB-
Series 9, 09/17/2058* | | | (3.00 | ) | | | Monthly | | | | 5.87 | | | | USD | | | | 27 | | | | 3,199 | | | | 5,273 | | | | (2,074 | ) |
| | | | | | | | |
Sale Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Citigroup Global Markets, Inc. | |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 5 | | | | (1,333 | ) | | | (559 | ) | | | (774 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 7 | | | | (1,865 | ) | | | (782 | ) | | | (1,083 | ) |
20
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty &
Referenced Obligation | | Fixed
Rate
(Pay)
Receive | | | Payment
Frequency | | | Implied
Credit
Spread at
December 31,
2020 | | | Notional
Amount
(000) | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Sale Contracts (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | % | | | Monthly | | | | 15.00 | % | | | USD | | | | 9 | | | $ | (2,399 | ) | | $ | (984 | ) | | $ | (1,415 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 14 | | | | (3,731 | ) | | | (1,530 | ) | | | (2,201 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 9 | | | | (2,398 | ) | | | (964 | ) | | | (1,434 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 12 | | | | (3,198 | ) | | | (1,256 | ) | | | (1,942 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 4 | | | | (1,066 | ) | | | (420 | ) | | | (646 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 6 | | | | (1,599 | ) | | | (743 | ) | | | (856 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (991 | ) | | | (1,141 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 6 | | | | (1,599 | ) | | | (768 | ) | | | (831 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 1 | | | | (267 | ) | | | (126 | ) | | | (141 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 6 | | | | (1,599 | ) | | | (706 | ) | | | (893 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 2 | | | | (533 | ) | | | (235 | ) | | | (298 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 4 | | | | (1,066 | ) | | | (518 | ) | | | (548 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (1,061 | ) | | | (1,071 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 1 | | | | (266 | ) | | | (157 | ) | | | (109 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 7 | | | | (1,865 | ) | | | (1,019 | ) | | | (846 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 3 | | | | (800 | ) | | | (372 | ) | | | (428 | ) |
Credit Suisse International | |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 94 | | | | (25,051 | ) | | | (5,937 | ) | | | (19,114 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 28 | | | | (7,462 | ) | | | (1,890 | ) | | | (5,572 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 318 | | | | (84,797 | ) | | | (12,702 | ) | | | (72,095 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 350 | | | | (93,275 | ) | | | (19,777 | ) | | | (73,498 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 56 | | | | (14,920 | ) | | | (8,112 | ) | | | (6,808 | ) |
Deutsche Bank AG | |
CDX-CMBX.NA.A
Series 6, 05/11/2063* | | | 2.00 | | | | Monthly | | | | 6.97 | | | | USD | | | | 135 | | | | (10,120 | ) | | | (2,578 | ) | | | (7,542 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 132 | | | | (35,178 | ) | | | (9,033 | ) | | | (26,145 | ) |
21
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Swap Counterparty &
Referenced Obligation | | Fixed
Rate
(Pay)
Receive | | | Payment
Frequency | | | Implied
Credit
Spread at
December 31,
2020 | | | Notional
Amount
(000) | | | Market
Value | | | Upfront
Premiums
Paid
(Received) | | | Unrealized
Appreciation/
(Depreciation) | |
Sale Contracts (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | % | | | Monthly | | | | 15.00 | % | | | USD | | | | 51 | | | $ | (13,592 | ) | | $ | (6,275 | ) | | $ | (7,317 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (448 | ) | | | (1,684 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (916 | ) | | | (1,216 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 28 | | | | (7,462 | ) | | | (3,127 | ) | | | (4,335 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 27 | | | | (7,195 | ) | | | (3,014 | ) | | | (4,181 | ) |
Goldman Sachs International | |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 49 | | | | (13,058 | ) | | | (4,134 | ) | | | (8,924 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 14 | | | | (3,731 | ) | | | (1,753 | ) | | | (1,978 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 4 | | | | (1,066 | ) | | | (350 | ) | | | (716 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,132 | ) | | | (713 | ) | | | (1,419 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 8 | | | | (2,133 | ) | | | (772 | ) | | | (1,361 | ) |
CDX-CMBX.NA.BBB-
Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 16 | | | | (4,265 | ) | | | (1,687 | ) | | | (2,578 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 41 | | | | (10,926 | ) | | | (5,448 | ) | | | (5,478 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 57 | | | | (15,190 | ) | | | (5,929 | ) | | | (9,261 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 34 | | | | (9,058 | ) | | | (5,103 | ) | | | (3,955 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 28 | | | | (7,459 | ) | | | (4,468 | ) | | | (2,991 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 39 | | | | (10,390 | ) | | | (6,313 | ) | | | (4,077 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 4 | | | | (1,066 | ) | | | (593 | ) | | | (473 | ) |
JPMorgan Securities, LLC | |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 9 | | | | (2,397 | ) | | | (1,121 | ) | | | (1,276 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 51 | | | | (13,587 | ) | | | (6,107 | ) | | | (7,480 | ) |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 18 | | | | (4,795 | ) | | | (2,174 | ) | | | (2,621 | ) |
Morgan Stanley Capital Services LLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
CDX-CMBX.NA.BBB- Series 6, 05/11/2063* | | | 3.00 | | | | Monthly | | | | 15.00 | | | | USD | | | | 35 | | | | (9,328 | ) | | | (2,410 | ) | | | (6,918 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | $ | (272,176 | ) | | $ | 155,692 | | | $ | (427,868 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ** | | Principal amount less than 500. |
22
| | |
| |
| | | AB Variable Products Series Fund |
| (a) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the aggregate market value of these securities amounted to $9,960,365 or 23.8% of net assets. |
| (b) | | Securities are perpetual and, thus, do not have a predetermined maturity date. The date shown, if applicable, reflects the next call date. |
| (c) | | Floating Rate Security. Stated interest/floor/ceiling rate was in effect at December 31, 2020. |
| (e) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 0.52% of net assets as of December 31, 2020, are considered illiquid and restricted. Additional information regarding such securities follows: |
| | | | | | | | | | | | | | | | |
144A/Restricted & Illiquid
Securities | | Acquisition
Date | | | Cost | | | Market
Value | | | Percentage of
Net Assets | |
PMT Credit Risk Transfer Trust
Series 2019-1R, Class A
2.145%, 03/27/2024 | | | 03/21/2019 | | | $ | 56,501 | | | $ | 53,848 | | | | 0.13 | % |
PMT Credit Risk Transfer Trust
Series 2019-2R, Class A
2.895%, 05/27/2023 | | | 06/07/2019 | | | | 78,675 | | | | 75,867 | | | | 0.18 | % |
PMT Credit Risk Transfer Trust
Series 2019-3R, Class A
2.845%, 10/27/2022 | | | 10/11/2019 | | | | 49,480 | | | | 48,900 | | | | 0.12 | % |
Terraform Global Operating LLC
6.125%, 03/01/2026 | | | 02/08/2018 | | | | 5,000 | | | | 5,134 | | | | 0.01 | % |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 1M2
5.398%, 11/25/2025 | | | 09/28/2015 | | | | 24,385 | | | | 23,795 | | | | 0.06 | % |
Wells Fargo Credit Risk Transfer Securities Trust Series 2015-WF1, Class 2M2
5.648%, 11/25/2025 | | | 09/28/2015 | | | | 10,442 | | | | 10,325 | | | | 0.02 | % |
| (f) | | Inverse interest only security. |
| (g) | | Position, or a portion thereof, has been segregated to collateralize OTC derivatives outstanding. |
| (h) | | Affiliated investments. |
| (i) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
| (j) | | The rate shown represents the 7-day yield as of period end. |
Currency Abbreviations:
AUD—Australian Dollar
BRL— Brazilian Real
CAD—Canadian Dollar
CNY—Chinese Yuan Renminbi
EUR—Euro
IDR—Indonesian Rupiah
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
MYR—Malaysian Ringgit
NZD—New Zealand Dollar
RUB—Russian Ruble
SEK—Swedish Krona
USD—United States Dollar
ZAR—South African Rand
Glossary:
ABS—Asset-Backed Securities
CBT—Chicago Board of Trade
CDOR—Canadian Dealer Offered Rate
23
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
CDX-CMBX.NA—North American Commercial Mortgage-Backed Index
CDX-NAHY—North American High Yield Credit Default Swap Index
CMBS—Commercial Mortgage-Backed Securities
CPI—Consumer Price Index
EURIBOR—Euro Interbank Offered Rate
LIBOR—London Interbank Offered Rate
REIT—Real Estate Investment Trust
REMICs—Real Estate Mortgage Investment Conduits
STIBOR—Stockholm Interbank Offered Rate
TBA—To Be Announced
TIPS—Treasury Inflation Protected Security
See notes to financial statements.
24
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $40,728,957) | | $ | 42,710,325 | |
Affiliated issuers (cost $765,463) | | | 765,463 | |
Cash | | | 270 | |
Cash collateral due from broker | | | 385,904 | |
Receivable for investment securities sold and foreign currency transactions | | | 875,169 | |
Interest receivable | | | 233,467 | |
Market value on credit default swaps (net premiums paid $291,767) | | | 171,569 | |
Unrealized appreciation on forward currency exchange contracts | | | 170,554 | |
Receivable for capital stock sold | | | 38,427 | |
Receivable for variation margin on futures | | | 14,635 | |
Receivable for variation margin on centrally cleared swaps | | | 5,495 | |
Affiliated dividends receivable | | | 13 | |
| | | | |
Total assets | | | 45,371,291 | |
| | | | |
LIABILITIES | | | | |
Due to custodian | | | 326 | |
Payable for investment securities purchased and foreign currency transactions | | | 2,723,198 | |
Market value on credit default swaps (net premiums received $136,075) | | | 443,745 | |
Unrealized depreciation on forward currency exchange contracts | | | 199,321 | |
Administrative fee payable | | | 20,266 | |
Advisory fee payable | | | 15,848 | |
Payable for capital stock redeemed | | | 8,886 | |
Distribution fee payable | | | 2,384 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 118,770 | |
| | | | |
Total liabilities | | | 3,532,890 | |
| | | | |
NET ASSETS | | $ | 41,838,401 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 3,819 | |
Additional paid-in capital | | | 38,401,477 | |
Distributable earnings | | | 3,433,105 | |
| | | | |
| | $ | 41,838,401 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 30,529,394 | | | | 2,778,264 | | | $ | 10.99 | |
| | | |
| B | | $ | 11,309,007 | | | | 1,040,399 | | | $ | 10.87 | |
See notes to financial statements.
25
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Interest | | $ | 1,380,590 | |
Dividends | | | | |
Unaffiliated issuers | | | 6,204 | |
Affiliated issuers | | | 1,477 | |
| | | | |
| | | 1,388,271 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 191,289 | |
Distribution fee—Class B | | | 28,111 | |
Transfer agency—Class A | | | 3,586 | |
Transfer agency—Class B | | | 1,293 | |
Custody and accounting | | | 122,170 | |
Audit and tax | | | 81,329 | |
Administrative | | | 73,497 | |
Printing | | | 24,134 | |
Legal | | | 19,228 | |
Directors’ fees | | | 16,600 | |
Miscellaneous | | | 7,797 | |
| | | | |
Total expenses | | | 569,034 | |
Less: expenses waived and reimbursed by the Adviser (see Note B) | | | (409 | ) |
| | | | |
Net expenses | | | 568,625 | |
| | | | |
Net investment income | | | 819,646 | |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 1,062,234 | |
Forward currency exchange contracts | | | (46,137 | ) |
Futures | | | 553,382 | |
Swaps | | | (261,562 | ) |
Swaptions written | | | 68,652 | |
Foreign currency transactions | | | (27,861 | ) |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments (a) | | | 708,835 | |
Forward currency exchange contracts | | | (12,520 | ) |
Futures | | | (2,974 | ) |
Swaps | | | (461,597 | ) |
Foreign currency denominated assets and liabilities | | | 9,687 | |
| | | | |
Net gain on investment and foreign currency transactions | | | 1,590,139 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 2,409,785 | |
| | | | |
| (a) | | Net of increase in accrued foreign capital gains taxes of $9,868. |
See notes to financial statements.
26
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE IN NET ASSETS FROM OPERATIONS | |
Net investment income | | $ | 819,646 | | | $ | 1,091,588 | |
Net realized gain on investment and foreign currency transactions | | | 1,348,708 | | | | 611,219 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 241,431 | | | | 1,868,257 | |
Contributions from Affiliates (see Note B) | | | –0 | – | | | 355 | |
| | | | | | | | |
Net increase in net assets from operations | | | 2,409,785 | | | | 3,571,419 | |
Distributions to Shareholders | |
Class A | | | (1,056,131 | ) | | | (961,173 | ) |
Class B | | | (355,053 | ) | | | (324,304 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net decrease | | | (3,575,324 | ) | | | (3,191,422 | ) |
| | | | | | | | |
Total decrease | | | (2,576,723 | ) | | | (905,480 | ) |
NET ASSETS | |
Beginning of period | | | 44,415,124 | | | | 45,320,604 | |
| | | | | | | | |
End of period | | $ | 41,838,401 | | | $ | 44,415,124 | |
| | | | | | | | |
See notes to financial statements.
27
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Intermediate Bond Portfolio (the “Portfolio”), is a series of AB Variable Products Series Fund, Inc. (the “Fund”). 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 is diversified as defined under the Investment Company Act of 1940. The Fund was incorporated in the State of Maryland as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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, 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
28
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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.
29
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Corporates—Investment Grade | | $ | –0 | – | | $ | 14,367,351 | | | $ | –0 | – | | $ | 14,367,351 | |
Mortgage Pass-Throughs | | | –0 | – | | | 6,649,714 | | | | –0 | – | | | 6,649,714 | |
Commercial Mortgage-Backed Securities | | | –0 | – | | | 6,156,854 | | | | –0 | – | | | 6,156,854 | |
Collateralized Mortgage Obligations | | | –0 | – | | | 4,863,757 | | | | –0 | – | | | 4,863,757 | |
Governments—Treasuries | | | –0 | – | | | 4,140,483 | | | | –0 | – | | | 4,140,483 | |
Inflation-Linked Securities | | | –0 | – | | | 1,935,214 | | | | –0 | – | | | 1,935,214 | |
Corporates—Non-Investment Grade | | | –0 | – | | | 1,742,005 | | | | –0 | – | | | 1,742,005 | |
Asset-Backed Securities | | | –0 | – | | | 1,608,613 | | | | –0 | – | | | 1,608,613 | |
Local Governments—US Municipal Bonds | | | –0 | – | | | 604,204 | | | | –0 | – | | | 604,204 | |
Governments—Sovereign Bonds | | | –0 | – | | | 258,475 | | | | –0 | – | | | 258,475 | |
Emerging Markets—Treasuries | | | –0 | – | | | 203,561 | | | | –0 | – | | | 203,561 | |
Emerging Markets—Corporate Bonds | | | –0 | – | | | 95,287 | | | | –0 | – | | | 95,287 | |
Quasi-Sovereigns | | | –0 | – | | | 64,572 | | | | –0 | – | | | 64,572 | |
Short-Term Investments: | | | | | | | | | | | | | | | | |
Investment Companies | | | 765,463 | | | | –0 | – | | | –0 | – | | | 765,463 | |
Short-Term Municipal Notes | | | –0 | – | | | 20,235 | | | | –0 | – | | | 20,235 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 765,463 | | | | 42,710,325 | | | | –0 | – | | | 43,475,788 | |
Other Financial Instruments(a): | | | | | | | | | | | | | | | | |
Assets: | |
Futures | | | 16,053 | | | | –0 | – | | | –0 | – | | | 16,053 | (b) |
Forward Currency Exchange Contracts | | | –0 | – | | | 170,554 | | | | –0 | – | | | 170,554 | |
Centrally Cleared Credit Default Swaps | | | –0 | – | | | 49,849 | | | | –0 | – | | | 49,849 | (b) |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | 31,540 | | | | –0 | – | | | 31,540 | (b) |
Credit Default Swaps | | | –0 | – | | | 171,569 | | | | –0 | – | | | 171,569 | |
Liabilities: | |
Futures | | | (85,730 | ) | | | –0 | – | | | –0 | – | | | (85,730 | )(b) |
Forward Currency Exchange Contracts | | | –0 | – | | | (199,321 | ) | | | –0 | – | | | (199,321 | ) |
Centrally Cleared Interest Rate Swaps | | | –0 | – | | | (60,504 | ) | | | –0 | – | | | (60,504 | )(b) |
Credit Default Swaps | | | –0 | – | | | (443,745 | ) | | | –0 | – | | | (443,745 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 695,786 | | | $ | 42,430,267 | | | $ | –0 | – | | $ | 43,126,053 | |
| | | | | | | | | | | | | | | | |
| (a) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
| (b) | | Only variation margin receivable/(payable) at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. Where applicable, centrally cleared swaps with upfront premiums are presented here at market value. |
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, 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
30
| | |
| |
| | | AB Variable Products Series Fund |
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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 up to $5 billion, .35% of the excess over $5 billion up to $8 billion and .30% in excess of $8 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, 2020, the reimbursement for such services amounted to $73,497.
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money
31
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $409.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 264 | | | $ | 25,046 | | | $ | 24,545 | | | $ | 765 | | | $ | 1 | |
During the year ended December 31, 2019, the Adviser reimbursed the Portfolio $355 for trading losses incurred due to a trade entry error.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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.
32
| | |
| |
| | | AB Variable Products Series Fund |
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 15,767,662 | | | $ | 12,663,134 | |
U.S. government securities | | | 22,725,840 | | | | 24,277,573 | |
The cost of investments for federal income tax purposes, gross unrealized appreciation and unrealized depreciation are as follows:
| | | | |
Cost | | $ | 41,542,728 | |
| | | | |
Gross unrealized appreciation | | $ | 2 ,991,144 | |
Gross unrealized depreciation | | | (1,104,548 | ) |
| | | | |
Net unrealized appreciation | | $ | 1,886,596 | |
| | | | |
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 cash collateral 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, 2020, 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”.
33
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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 forward currency exchange contracts. 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, 2020, 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. If a put or call option purchased by the Portfolio were permitted to expire without being sold or exercised, its premium would represent a loss to the Portfolio. 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. The Portfolio’s maximum payment for written put options equates to the number of shares multiplied by the strike price. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract. 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. The Portfolio’s maximum payment for written put swaptions equates to the notional amount of the underlying swap. In certain circumstances maximum payout amounts may be partially offset by recovery values of the respective referenced assets and upfront premium received upon entering into the contract.
During the year ended December 31, 2020, the Portfolio held written swaptions for hedging and non-hedging purposes.
34
| | |
| |
| | | AB Variable Products Series Fund |
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, 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 for OTC swaps 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 clearinghouse on which the transaction is effected. Such amount is shown as cash collateral 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 centrally cleared swaps is generally less than non-centrally cleared swaps, since the clearinghouse, which is the issuer or counterparty to each centrally cleared 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.
35
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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, 2020, 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 referenced obligations with the same counterparty.
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.
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.
During the year ended December 31, 2020, the Portfolio held credit default swaps for hedging and non-hedging purposes.
Total Return Swaps:
The Portfolio may enter into total return swaps in order to 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.
36
| | |
| |
| | | AB Variable Products Series Fund |
During the year ended December 31, 2020, 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”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 futures | | $ | 16,053 | * | | Receivable/Payable for variation margin on futures | | $ | 85,730 | * |
| | | | |
Credit contracts | | Receivable/Payable for variation margin on centrally cleared swaps | | | 73,687 | * | | | | | | |
| | | | |
Interest rate contracts | | Receivable/Payable for variation margin on centrally cleared swaps | | | 31,532 | * | | Receivable/Payable for variation margin on centrally cleared swaps | | | 62,719 | * |
| | | | |
Foreign currency contracts | | Unrealized appreciation on forward currency exchange contracts | | | 170,554 | | | Unrealized depreciation on forward currency exchange contracts | | | 199,321 | |
| | | | |
Credit contracts | | Market value on credit default swaps | | | 171,569 | | | Market value on credit default swaps | | | 443,745 | |
| | | | | | | | | | | | |
Total | | | | $ | 463,395 | | | | | $ | 791,515 | |
| | | | | | | | | | | | |
| * | | Only variation margin receivable/payable at period end is reported within the statement of assets and liabilities. This amount reflects cumulative unrealized appreciation/(depreciation) on futures and centrally cleared swaps as reported in the portfolio of investments. |
37
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives
Within Statement of Operations | | 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 | | $ | 553,382 | | | $ | (2,974 | ) |
| | | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | | (46,137 | ) | | | (12,520 | ) |
| | | |
Interest rate contracts | | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | | | 6,164 | | | | –0 | – |
| | | |
Credit contracts | | Net realized gain (loss) on swaptions written; Net change in unrealized appreciation/depreciation of swaptions written | | | 62,488 | | | | –0 | – |
| | | |
Interest rate contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | 41,286 | | | | 29,518 | |
| | | |
Credit contracts | | Net realized gain (loss) on swaps; Net change in unrealized appreciation/depreciation of swaps | | | (302,848 | ) | | | (491,115 | ) |
| | | | | | | | | | |
| | | |
Total | | | | $ | 314,335 | | | $ | (477,091 | ) |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Futures: | |
Average notional amount of buy contracts | | $ | 17,975,434 | |
Average notional amount of sale contracts | | $ | 4,291,292 | |
Forward Currency Exchange Contracts: | |
Average principal amount of buy contracts | | $ | 2,112,270 | (a) |
Average principal amount of sale contracts | | $ | 3,399,401 | |
Swaptions Written: | |
Average notional amount | | $ | 3,358,437 | (b) |
Centrally Cleared Interest Rate Swaps: | |
Average notional amount | | $ | 7,188,157 | |
Credit Default Swaps: | |
Average notional amount of buy contracts | | $ | 1,246,429 | (c) |
Average notional amount of sale contracts | | $ | 2,909,032 | |
Centrally Cleared Credit Default Swaps: | |
Average notional amount of buy contracts | | $ | 2,100,615 | (c) |
Average notional amount of sale contracts | | $ | 844,547 | (a) |
Total Return Swaps: | |
Average notional amount | | $ | 1,640,000 | (d) |
| (a) | | Positions were open for eleven months during the year. |
| (b) | | Positions were open for four months during the year. |
| (c) | | Positions were open for seven months during the year. |
| (d) | | Positions were open for one month during the year. |
38
| | |
| |
| | | AB Variable Products Series Fund |
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 OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets
Subject to a MA | | | Derivatives
Available
for Offset | | | Cash
Collateral
Received* | | | Security
Collateral
Received* | | | Net
Amount of
Derivative
Assets | |
Bank of America, NA | | $ | 74 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 74 | |
Barclays Bank PLC | | | 4,316 | | | | (4,316 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Citibank, NA/ Citigroup Global Markets, Inc. | | | 188,455 | | | | (29,848 | ) | | | –0 | – | | | –0 | – | | | 158,607 | |
Goldman Sachs Bank USA/Goldman Sachs International | | | 85,513 | | | | (80,474 | ) | | | –0 | – | | | –0 | – | | | 5,039 | |
HSBC Bank USA | | | 34,838 | | | | (1,912 | ) | | | –0 | – | | | –0 | – | | | 32,926 | |
JPMorgan Chase Bank, NA/JPMorgan Securties, LLC | | | 8,046 | | | | (8,046 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley & Co. International PLC/Morgan Stanley & Co., Inc./Morgan Stanley Capital Services LLC/Morgan Stanley Capital Services, Inc. | | | 9,597 | | | | (9,597 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 8,677 | | | | (8,677 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
UBS AG | | | 2,607 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 2,607 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 342,123 | | | $ | (142,870 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 199,253 | ^ |
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Liabilities
Subject to a MA | | | Derivatives
Available
for Offset | | | Cash
Collateral
Pledged* | | | Security
Collateral
Pledged* | | | Net
Amount of
Derivative
Liabilities | |
Barclays Bank PLC | | $ | 5,906 | | | $ | (4,316 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 1,590 | |
Citibank, NA/ Citigroup Global Markets, Inc. | | | 29,848 | | | | (29,848 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Credit Suisse International | | | 225,505 | | | | –0 | – | | | –0 | – | | | (225,505 | ) | | | –0 | – |
Deutsche Bank AG | | | 77,811 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 77,811 | |
Goldman Sachs Bank USA/Goldman Sachs International | | | 80,474 | | | | (80,474 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
HSBC Bank USA | | | 1,912 | | | | (1,912 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank, NA/JPMorgan Securties, LLC | | | 21,191 | | | | (8,046 | ) | | | –0 | – | | | –0 | – | | | 13,145 | |
Morgan Stanley & Co. International PLC/Morgan Stanley & Co., Inc./Morgan Stanley Capital Services LLC/Morgan Stanley Capital Services, Inc. | | | 159,194 | | | | (9,597 | ) | | | –0 | – | | | –0 | – | | | 149,597 | |
Standard Chartered Bank | | | 23,156 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 23,156 | |
State Street Bank & Trust Co. | | | 18,069 | | | | (8,677 | ) | | | –0 | – | | | –0 | – | | | 9,392 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 643,066 | | | $ | (142,870 | ) | | $ | –0 | – | | $ | (225,505 | ) | | $ | 274,691^ | |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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. |
39
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
2. Currency Transactions
The Portfolio may invest in non-U.S. Dollar-denominated 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. TBA and Dollar Rolls
The Portfolio may invest in TBA mortgage-backed securities. A TBA, or “To Be Announced”, trade represents a contract for the purchase or sale of mortgage-backed securities to be delivered at a future agree-upon date; however, the specific mortgage pool numbers or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade. Mortgage pools (including fixed-rate or variable-rate mortgages) guaranteed by the Government National Mortgage Association, or GNMA, the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or FHLMC, are subsequently allocated to the TBA transactions.
The Portfolio may enter into certain TBA transactions known as 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, 2020, the Portfolio earned drop income of $9,221 which is included in interest income in the accompanying statement of operations.
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 137,413 | | | | 208,310 | | | | | | | $ | 1,476,072 | | | $ | 2,214,654 | |
Shares issued in reinvestment of dividends and distributions | | | 97,250 | | | | 90,336 | | | | | | | | 1,056,131 | | | | 961,173 | |
Shares redeemed | | | (509,318 | ) | | | (504,296 | ) | | | | | | | (5,519,329 | ) | | | (5,367,537 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (274,655 | ) | | | (205,650 | ) | | | | | | $ | (2,987,126 | ) | | $ | (2,191,710 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | |
Shares sold | | | 132,767 | | | | 112,389 | | | | | | | $ | 1,411,697 | | | $ | 1,181,651 | |
Shares issued in reinvestment of dividends and distributions | | | 33,028 | | | | 30,769 | | | | | | | | 355,053 | | | | 324,304 | |
Shares redeemed | | | (222,779 | ) | | | (239,084 | ) | | | | | | | (2,354,948 | ) | | | (2,505,667 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (56,984 | ) | | | (95,926 | ) | | | | | | $ | (588,198 | ) | | $ | (999,712 | ) |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 80% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE F: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market.
40
| | |
| |
| | | AB Variable Products Series Fund |
Interest Rate Risk—Changes in interest rates will affect the value of investments in fixed-income securities. When interest rates rise, the value of existing 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 and accrued interest. 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 Securities 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 and negative perceptions of the junk bond market generally, and may be more difficult to trade than other types of securities.
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.
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 more difficult to trade 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, and because these investments may be 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.
Mortgage-Backed and/or Other Asset-Backed Securities Risk—Investments in mortgage-related and other asset-backed securities are subject to certain additional risks. The value of these securities may be particularly sensitive to changes in interest rates. These risks include “extension risk”, which is the risk that, in periods of rising interest rates, issuers may delay the payment of principal, and “prepayment risk”, which is the risk that in periods of falling interest rates, issuers may pay principal sooner than expected, exposing the Portfolio to a lower rate of return upon reinvestment of principal. Mortgage-backed securities offered by nongovernmental issuers and other asset-backed securities may be subject to other risks, such as higher rates of default in the mortgages or assets backing the securities or risks associated with the nature and servicing of mortgages or assets backing the securities.
Leverage Risk—When the Portfolio borrows money or otherwise leverages its investments, its performance 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 or by borrowing money. The use of other types of derivative instruments by the Portfolio, such as 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.
Illiquid Investments Risk—Illiquid investments risk exists when certain investments are or become difficult to purchase or sell. Difficulty in selling such investments may result in sales at disadvantageous prices affecting the value of your investment in the Portfolio. Causes of illiquid investments risk may include low trading volumes, large positions and heavy
41
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
redemptions of Portfolio shares. lliquid investments risk may be higher in a rising interest rate environment, when the value and liquidity of fixed-income securities generally decline.
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 on the statement of assets and liabilities.
Active Trading Risk—The Portfolio expects to engage in active and frequent trading of its portfolio securities and its portfolio turnover rate is expected to exceed 100%. A higher rate of portfolio turnover increases transaction costs, which may negatively affect the Portfolio’s return.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE G: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
42
| | |
| |
| | | AB Variable Products Series Fund |
NOTE H: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 1,411,184 | | | $ | 1,285,477 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 1,411,184 | | | $ | 1,285,477 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 1,363,985 | |
Undistributed capital gains | | | 198,097 | (a) |
Other losses | | | (9,819 | )(b) |
Unrealized appreciation/(depreciation) | | | 1,880,842 | (c) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 3,433,105 | |
| | | | |
| (a) | | During the fiscal year, the Portfolio utilized $164,058 of capital loss carry forwards to offset current year net realized gains. |
| (b) | | As of December 31, 2020, the cumulative deferred loss on straddles was $9,819. |
| (c) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of Treasury inflation-protected securities, the amortization on callable bonds, the tax treatment of swaps, and the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, permanent differences primarily due to contributions from the Adviser resulted in a net increase in distributable earnings and a net decrease in additional paid-in capital. 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.
43
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $10.73 | | | | $10.21 | | | | $10.56 | | | | $10.65 | | | | $10.63 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .22 | (b) | | | .26 | (b) | | | .23 | (b) | | | .23 | | | | .28 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .41 | | | | .57 | | | | (.31 | ) | | | .14 | | | | .23 | |
Contributions from Affiliates | | | –0 | – | | | .00 | (c) | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .63 | | | | .83 | | | | (.08 | ) | | | .37 | | | | .51 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.37 | ) | | | (.31 | ) | | | (.13 | ) | | | (.36 | ) | | | (.35 | ) |
Distributions from net realized gain on investment transactions | | | –0 | – | | | –0 | – | | | (.14 | ) | | | (.10 | ) | | | (.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.37 | ) | | | (.31 | ) | | | (.27 | ) | | | (.46 | ) | | | (.49 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.99 | | | | $10.73 | | | | $10.21 | | | | $10.56 | | | | $10.65 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 5.96 | % | | | 8.20 | % | | | (.72 | )% | | | 3.52 | % | | | 4.71 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $30,529 | | | | $32,763 | | | | $33,267 | | | | $38,172 | | | | $42,183 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.27 | % | | | 1.26 | % | | | 1.16 | % | | | 1.11 | % | | | 1.06 | % |
Expenses, before waivers/reimbursements | | | 1.27 | % | | | 1.27 | % | | | 1.16 | % | | | 1.11 | % | | | 1.06 | % |
Net investment income | | | 1.99 | %(b) | | | 2.48 | %(b) | | | 2.20 | %(b) | | | 2.11 | % | | | 2.60 | %† |
Portfolio turnover rate** | | | 89 | % | | | 75 | % | | | 155 | % | | | 216 | % | | | 156 | % |
See footnote summary on page 45.
44
| | |
| |
| | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $10.62 | | | | $10.10 | | | | $10.45 | | | | $10.54 | | | | $10.53 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a) | | | .19 | (b) | | | .23 | (b) | | | .20 | (b) | | | .20 | | | | .25 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .41 | | | | .58 | | | | (.31 | ) | | | .14 | | | | .22 | |
Contributions from Affiliates | | | –0 | – | | | .00 | (c) | | | –0 | – | | | .00 | (c) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .60 | | | | .81 | | | | (.11 | ) | | | .34 | | | | .47 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.35 | ) | | | (.29 | ) | | | (.10 | ) | | | (.33 | ) | | | (.32 | ) |
Distributions from net realized gain on investment transactions | | | –0 | – | | | –0 | – | | | (.14 | ) | | | (.10 | ) | | | (.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.35 | ) | | | (.29 | ) | | | (.24 | ) | | | (.43 | ) | | | (.46 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $10.87 | | | | $10.62 | | | | $10.10 | | | | $10.45 | | | | $10.54 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 5.64 | % | | | 7.99 | % | | | (1.01 | )% | | | 3.28 | % | | | 4.36 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $11,309 | | | | $11,652 | | | | $12,054 | | | | $14,786 | | | | $16,029 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.52 | % | | | 1.51 | % | | | 1.41 | % | | | 1.36 | % | | | 1.32 | % |
Expenses, before waivers/reimbursements | | | 1.52 | % | | | 1.52 | % | | | 1.41 | % | | | 1.36 | % | | | 1.32 | % |
Net investment income | | | 1.74 | %(b) | | | 2.23 | %(b) | | | 1.95 | %(b) | | | 1.87 | % | | | 2.36 | %† |
Portfolio turnover rate** | | | 89 | % | | | 75 | % | | | 155 | % | | | 216 | % | | | 156 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Amount is less than $.005. |
| (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. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total Return |
| $.03 | | .28% | | .29% |
| * | | 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, 2019, December 31, 2017, and December 31, 2016 by .03%, .03% and .03%, respectively. |
| ** | | The Portfolio accounts for dollar roll transactions as purchases and sales. |
See notes to financial statements.
45
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Intermediate Bond Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Intermediate Bond Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
46
| | |
| | |
| | |
| |
| INTERMEDIATE BOND PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
|
|
|
|
| | |
| | |
| OFFICERS | | |
Michael Canter(2), Vice President Shawn E. Keegan(2), Vice President Janaki Rao(2), Vice President Emilie D. Wrapp, Secretary | | Michael B. Reyes, Senior Analyst 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 (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. Messrs. Canter, Keegan, and Rao are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
47
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| |
| MANAGEMENT OF THE FUND | | AB 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 INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| | | | | | | | |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith, # 1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr., ## Chairman of the Board 79 (2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
48
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Jorge A. Bermudez, ## 69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
| | | | | | | | |
Michael J. Downey, ## 77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin, ## 72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
49
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Jeanette W. Loeb, ## 68 (2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen, ## 65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody, ## 68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
50
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE, (YEAR FIRST ELECTED**) | | PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner, ## 81 (2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| | | | | | | | |
| * | The address for the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
51
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB 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^ 60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Michael Canter 51 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also the Director of Securitized Assets and US Multi-Sector Fixed-Income. |
| | | | |
Shawn E. Keegan 49 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Janaki Rao 50 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Emilie D. Wrapp 65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes 44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo 61 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke 60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto 56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
52
| | |
| | |
| | |
| |
| INTERMEDIATE BOND PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
53
| | |
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Intermediate Bond Portfolio (the “Fund”) at a meeting held by video conference on November 3-5, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund and the money market fund advised by the Adviser in which the Fund invests a portion of its assets.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 at the request of the directors. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant at the request of the directors. 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 Fund, including those relating to its subsidiaries that provide transfer agency and distribution services to the Fund. The directors recognized that it is difficult to
54
| | |
| |
| | | AB Variable Products Series Fund |
make comparisons of the profitability of the Advisory Agreement with the profitability of fund advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund and the money market fund advised by the Adviser in which the Fund invests, 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 Fund’s Class B shares; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended July 31, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 payable by other funds. The directors compared the Fund’s contractual effective advisory fee rate with a peer group median and noted that it was above the median. The directors took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with that for another fund advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
55
| | |
| INTERMEDIATE BOND PORTFOLIO | | |
CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the medians. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
56
VPS-IB-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS
SERIES FUND, INC.
| + | | INTERNATIONAL GROWTH PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| INTERNATIONAL GROWTH PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—International Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
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 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.
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 predetermined 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 contracts, options on futures contracts, 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 primary benchmark, the Morgan Stanley Capital International (“MSCI”) World Index ex USA (net), and the Morgan Stanley Capital International All Country World Index (“MSCI ACWI”) ex USA (net) for the one-, five- and 10-year periods ended December 31, 2020.
All share classes outperformed the primary benchmark and the MSCI ACWI ex USA (net) for the annual period. Relative to the primary benchmark, security selection contributed, particularly in the industrials and health-care sectors. Only selection in consumer staples detracted from performance. Sector selection also contributed to performance, led by an overweight to technology and an underweight to energy. Underweights to consumer discretionary and communication services offset gains somewhat. Country selection (a result of bottom-up security analysis driven by fundamental research) contributed, mainly because of overweights to the US and Denmark, while underweights to South Korea and Taiwan detracted.
The Portfolio used derivatives in the form of currency forwards for hedging purposes, which detracted from absolute returns for the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Non-US equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of
1
| | |
| |
| | | AB Variable Products Series Fund |
the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio’s exposures remain focused on secular growth themes, particularly those promoting social and environmental sustainability. This has helped the Portfolio’s Senior Investment Management Team (the “Team”) to identify companies with strong competitive advantages and high returns on invested capital that the Team believes are more likely to sustain higher-than-average growth over the long term. The Team believes organic sales and earnings growth will be key drivers of returns going forward. The Portfolio is positioned particularly well in this regard.
2
| | |
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The MSCI World Index ex USA and the MSCI ACWI ex USA are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The MSCI World Index ex USA (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed markets, excluding the US. The MSCI ACWI ex USA (net, free float-adjusted, market capitalization weighted) represents the equity market performance of developed and emerging markets, excluding the US. 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. Net returns include the reinvestment of dividends after deduction of non-US withholding tax. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, may underperform the market generally.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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, and because these investments may be 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- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
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 for the Portfolio, but there is no guarantee that its techniques will produce the intended results. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report represents past performance and does not guarantee future results. Current performance may be lower or higher than the
(Disclosures, Risks and Note About Historical Performance continued on next page)
3
| | |
| | |
| DISCLOSURES AND RISKS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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) 227 4618. 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.
4
| | |
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARKS | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| International Growth Portfolio Class A | | | 29.94% | | | | 11.47% | | | | 6.30% | |
| | | |
| International Growth Portfolio Class B | | | 29.60% | | | | 11.20% | | | | 6.04% | |
| | | |
| Primary Benchmark: MSCI World Index ex USA (net) | | | 7.59% | | | | 7.64% | | | | 5.19% | |
| | | |
| MSCI ACWI ex USA (net) | | | 10.65% | | | | 8.93% | | | | 4.92% | |
1 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 1.41% and 1.66% 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 1.36% and 1.61% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in International Growth Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on pages 3-4.
5
| | |
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | |
Class A | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,294.50 | | | $ | 7.32 | | | | 1.27 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,018.75 | | | $ | 6.44 | | | | 1.27 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,292.70 | | | $ | 8.76 | | | | 1.52 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,017.50 | | | $ | 7.71 | | | | 1.52 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
6
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Vestas Wind Systems A/S | | $ | 1,722,584 | | | | 2.9 | % |
Koninklijke Philips NV | | | 1,649,101 | | | | 2.8 | |
Partners Group Holding AG | | | 1,643,883 | | | | 2.8 | |
Neste Oyj | | | 1,620,298 | | | | 2.7 | |
Schneider Electric SE | | | 1,542,686 | | | | 2.6 | |
Orsted AS | | | 1,528,401 | | | | 2.6 | |
Aptiv PLC | | | 1,520,224 | | | | 2.5 | |
London Stock Exchange Group PLC | | | 1,496,421 | | | | 2.5 | |
HDFC Bank Ltd. | | | 1,465,442 | | | | 2.5 | |
WSP Global, Inc. | | | 1,363,257 | | | | 2.3 | |
| | | | | | | | | |
| | | $ | 15,552,297 | | | | 26.2 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Information Technology | | $ | 10,770,492 | | | | 18.4 | % |
Industrials | | | 9,877,853 | | | | 16.9 | |
Financials | | | 9,366,437 | | | | 16.0 | |
Health Care | | | 9,007,718 | | | | 15.4 | |
Consumer Staples | | | 4,811,890 | | | | 8.2 | |
Consumer Discretionary | | | 4,363,728 | | | | 7.5 | |
Materials | | | 3,633,797 | | | | 6.2 | |
Communication Services | | | 2,025,353 | | | | 3.5 | |
Energy | | | 1,620,298 | | | | 2.8 | |
Utilities | | | 1,528,401 | | | | 2.6 | |
Short-Term Investments | | | 1,455,997 | | | | 2.5 | |
| | | | | | | | | |
Total Investments | | $ | 58,461,964 | | | | 100.0 | % |
| 2 | | 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 derivative transactions, which may be used for hedging or investment purposes (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
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| COUNTRY BREAKDOWN1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Netherlands | | $ | 6,100,932 | | | | 10.4 | % |
United States | | | 5,288,794 | | | | 9.1 | |
Switzerland | | | 4,772,716 | | | | 8.2 | |
United Kingdom | | | 4,750,926 | | | | 8.1 | |
Denmark | | | 4,572,882 | | | | 7.8 | |
France | | | 4,517,794 | | | | 7.7 | |
Japan | | | 4,241,489 | | | | 7.3 | |
Germany | | | 3,221,397 | | | | 5.5 | |
Finland | | | 2,867,524 | | | | 4.9 | |
India | | | 2,712,958 | | | | 4.6 | |
China | | | 2,232,411 | | | | 3.8 | |
Sweden | | | 2,088,994 | | | | 3.6 | |
Ireland | | | 2,039,579 | | | | 3.5 | |
Other | | | 7,597,571 | | | | 13.0 | |
Short-Term Investments | | | 1,455,997 | | | | 2.5 | |
| | | | | | | | | |
Total Investments | | $ | 58,461,964 | | | | 100.0 | % |
| 1 | | All data are as of December 31, 2020. 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 3.4% or less in the following: Argentina, Austria, Canada, Hong Kong, Indonesia, Norway, Peru and Spain. |
8
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
| Company | |
Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–95.8% | | | | | | | | |
| | | | | | | | |
INFORMATION TECHNOLOGY–18.1% | | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–5.4% | | | | | | | | |
Flex Ltd.(a) | | | 43,800 | | | $ | 787,524 | |
Halma PLC | | | 40,310 | | | | 1,349,992 | |
Keyence Corp. | | | 1,900 | | | | 1,068,782 | |
| | | | | | | | |
| | | | | | | 3,206,298 | |
| | | | | |
IT SERVICES–2.7% | | | | | | | | |
Adyen NV(a)(b) | | | 427 | | | | 992,152 | |
Shopify, Inc.–Class A(a) | | | 550 | | | | 622,572 | |
| | | | | | | | |
| | | | | | | 1,614,724 | |
| | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–8.1% | | | | | | | | |
ASML Holding NV | | | 2,536 | | | | 1,227,873 | |
Infineon Technologies AG | | | 31,505 | | | | 1,203,132 | |
NXP Semiconductors NV | | | 7,340 | | | | 1,167,133 | |
STMicroelectronics NV | | | 33,717 | | | | 1,247,386 | |
| | | | | | | | |
| | | | | | | 4,845,524 | |
| | | | | |
SOFTWARE–1.9% | | | | | | | | |
Dassault Systemes SE | | | 5,443 | | | | 1,103,946 | |
| | | | | | | | |
| | | | | | | 10,770,492 | |
| | | | | |
INDUSTRIALS–16.6% | | | | | | | | |
AEROSPACE & DEFENSE–1.8% | | | | | | | | |
Hexcel Corp. | | | 22,470 | | | | 1,089,570 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–2.1% | | | | | | | | |
TOMRA Systems ASA | | | 24,840 | | | | 1,222,015 | |
| | | | | | | | |
CONSTRUCTION & ENGINEERING–2.3% | | | | | | | | |
WSP Global, Inc.(c) | | | 14,390 | | | | 1,363,257 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–5.5% | | | | | | | | |
Schneider Electric SE | | | 10,674 | | | | 1,542,686 | |
Vestas Wind Systems A/S | | | 7,292 | | | | 1,722,584 | |
| | | | | | | | |
| | | | | | | 3,265,270 | |
| | | | | |
MACHINERY–2.9% | | | | | | | | |
SMC Corp. | | | 1,800 | | | | 1,099,327 | |
Xylem, Inc./NY | | | 6,218 | | | | 632,930 | |
| | | | | | | | |
| | | | | | | 1,732,257 | |
| | | | | |
PROFESSIONAL SERVICES–2.0% | | | | | | | | |
Recruit Holdings Co., Ltd. | | | 28,700 | | | | 1,205,484 | |
| | | | | | | | |
| | | | | | | 9,877,853 | |
| | | | | |
FINANCIALS–15.8% | | | | | | | | |
BANKS–7.9% | | | | | | | | |
Bank Mandiri Persero Tbk PT | | | 608,000 | | | | 274,359 | |
Credicorp Ltd. | | | 1,780 | | | | 291,955 | |
Erste Group Bank AG(a) | | | 43,000 | | | | 1,309,897 | |
HDFC Bank Ltd.(a) | | | 74,290 | | | | 1,465,442 | |
| | | | | | | | |
Svenska Handelsbanken AB–Class A(a) | | | 131,264 | | | | 1,323,145 | |
| | | | | | | | |
| | | | | | | 4,664,798 | |
| | | | | |
CAPITAL MARKETS–5.3% | | | | | | | | |
London Stock Exchange Group PLC | | | 12,123 | | | | 1,496,421 | |
Partners Group Holding AG | | | 1,399 | | | | 1,643,883 | |
| | | | | | | | |
| | | | | | | 3,140,304 | |
| | | | | |
INSURANCE–2.6% | | | | | | | | |
AIA Group Ltd. | | | 81,800 | | | | 996,825 | |
Prudential PLC | | | 30,700 | | | | 564,510 | |
| | | | | | | | |
| | | | | | | 1,561,335 | |
| | | | | |
| | | | | | | 9,366,437 | |
| | | | | |
HEALTH CARE–15.1% | | | | | | | | |
BIOTECHNOLOGY–1.2% | | | | | | | | |
Abcam PLC(c) | | | 33,221 | | | | 704,161 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–6.9% | | | | | | | | |
Alcon, Inc.(a) | | | 18,470 | | | | 1,226,336 | |
Koninklijke Philips NV(a) | | | 30,614 | | | | 1,649,101 | |
STERIS PLC | | | 6,640 | | | | 1,258,545 | |
| | | | | | | | |
| | | | | | | 4,133,982 | |
| | | | | |
HEALTH CARE PROVIDERS & SERVICES–2.1% | | | | | | | | |
Apollo Hospitals Enterprise Ltd. | | | 37,914 | | | | 1,247,516 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–4.2% | | | | | | | | |
Gerresheimer AG | | | 8,332 | | | | 898,510 | |
ICON PLC(a) | | | 5,217 | | | | 1,017,211 | |
Tecan Group AG | | | 1,228 | | | | 602,312 | |
| | | | | | | | |
| | | | | | | 2,518,033 | |
| | | | | |
PHARMACEUTICALS–0.7% | | | | | | | | |
Roche Holding AG | | | 1,160 | | | | 404,026 | |
| | | | | | | | |
| | | | | | | 9,007,718 | |
| | | | | |
CONSUMER STAPLES–8.1% | | | | | | | | |
FOOD PRODUCTS–4.3% | | | | | | | | |
Danone SA | | | 9,479 | | | | 623,776 | |
Kerry Group PLC–Class A | | | 7,039 | | | | 1,022,368 | |
Nestle SA | | | 7,581 | | | | 896,160 | |
| | | | | | | | |
| | | | 2,542,304 | |
| | | | | |
HOUSEHOLD PRODUCTS–2.7% | | | | | | | | |
Essity AB–Class B | | | 23,770 | | | | 765,849 | |
Unicharm Corp. | | | 18,300 | | | | 867,896 | |
| | | | | | | | |
| | | | 1,633,745 | |
| | | | | |
PERSONAL PRODUCTS–1.1% | | | | | | | | |
Unilever PLC | | | 10,602 | | | | 635,841 | |
| | | | | | | | |
| | | | 4,811,890 | |
| | | | | |
CONSUMER DISCRETIONARY–7.3% | | | | | | | | |
AUTO COMPONENTS–2.5% | |
Aptiv PLC | | | 11,668 | | | | 1,520,224 | |
| | | | | | | | |
9
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
| Company | |
Shares | | | U.S. $ Value | |
| | | | | | | | |
INTERNET & DIRECT MARKETING RETAIL–1.1% | | | | | | | | |
MercadoLibre, Inc.(a) | | | 375 | | | $ | 628,208 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–3.7% | | | | | | | | |
Puma SE(a) | | | 9,951 | | | | 1,119,755 | |
Shenzhou International Group Holdings Ltd. | | | 55,900 | | | | 1,095,541 | |
| | | | | | | | |
| | | | 2,215,296 | |
| | | | | |
| | | | 4,363,728 | |
| | | | | |
MATERIALS–6.1% | | | | | | | | |
CHEMICALS–4.0% | | | | | | | | |
Chr Hansen Holding A/S(a) | | | 12,794 | | | | 1,321,897 | |
Koninklijke DSM NV(c) | | | 6,191 | | | | 1,064,674 | |
| | | | | | | | |
| | | | 2,386,571 | |
| | | | | |
CONTAINERS & PACKAGING–2.1% | | | | | | | | |
Huhtamaki Oyj | | | 24,050 | | | | 1,247,226 | |
| | | | | | | | |
| | | | 3,633,797 | |
| | | | | |
COMMUNICATION SERVICES–3.4% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–1.5% | | | | | | | | |
Cellnex Telecom SA(b)(c) | | | 14,795 | | | | 888,483 | |
| | | | | | | | |
INTERACTIVE MEDIA & SERVICES–1.9% | | | | | | | | |
Tencent Holdings Ltd. | | | 15,800 | | | | 1,136,870 | |
| | | | | | | | |
| | | | 2,025,353 | |
| | | | | |
ENERGY–2.7% | | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–2.7% | | | | | | | | |
Neste Oyj | | | 22,317 | | | | 1,620,298 | |
| | | | | | | | |
| | | | | | | | |
UTILITIES–2.6% | | | | | | | | |
ELECTRIC UTILITIES–2.6% | | | | | | | | |
Orsted AS(b) | | | 7,470 | | | | 1,528,401 | |
| | | | | | | | |
Total Common Stocks
(cost $35,542,868) | | | | | | | 57,005,967 | |
| | | | | |
SHORT-TERM INVESTMENTS–2.5% | | | | | | | | |
INVESTMENT COMPANIES–2.5% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 0.03%(d)(e)(f)
(cost $1,455,997) | | | 1,455,997 | | | | 1,455,997 | |
| | | | | | | | |
TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL FOR SECURITIES LOANED–98.3%
(cost $36,998,865) | | | | | | | 58,461,964 | |
| | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–3.9% | | | | | | | | |
INVESTMENT COMPANIES–3.9% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB, 0.03%(d)(e)(f)
(cost $2,334,903) | | | 2,334,903 | | | | 2,334,903 | |
| | | | | | | | |
TOTAL INVESTMENTS–102.2%
(cost $39,333,768) | | | | | | | 60,796,867 | |
Other assets less liabilities–(2.2)% | | | | | | | (1,318,429 | ) |
| | | | | |
NET ASSETS–100.0% | | | | | | $ | 59,478,438 | |
| | | | | |
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 | | | | 198 | | | | CNY | | | | 1,298 | | | | 02/10/2021 | | | $ | 346 | |
Barclays Bank PLC | | | INR | | | | 10,646 | | | | USD | | | | 144 | | | | 01/15/2021 | | | | (1,265 | ) |
Citibank, NA | | | BRL | | | | 3,185 | | | | USD | | | | 613 | | | | 01/05/2021 | | | | (295 | ) |
Citibank, NA | | | USD | | | | 598 | | | | BRL | | | | 3,185 | | | | 01/05/2021 | | | | 15,270 | |
Citibank, NA | | | USD | | | | 1,938 | | | | KRW | | | | 2,204,380 | | | | 01/14/2021 | | | | 88,353 | |
Citibank, NA | | | USD | | | | 2,064 | | | | TWD | | | | 57,882 | | | | 01/27/2021 | | | | 2,786 | |
Citibank, NA | | | CHF | | | | 1,185 | | | | USD | | | | 1,304 | | | | 01/29/2021 | | | | (35,363 | ) |
Citibank, NA | | | USD | | | | 4,817 | | | | CNY | | | | 31,539 | | | | 02/10/2021 | | | | 11,586 | |
Citibank, NA | | | USD | | | | 4,987 | | | | JPY | | | | 519,072 | | | | 02/26/2021 | | | | 42,615 | |
Deutsche Bank AG | | | INR | | | | 29,290 | | | | USD | | | | 395 | | | | 01/15/2021 | | | | (5,597 | ) |
10
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
Deutsche Bank AG | | | CAD | | | | 928 | | | | USD | | | | 727 | | | | 02/18/2021 | | | $ | (1,978 | ) |
Goldman Sachs Bank USA | | | USD | | | | 121 | | | | KRW | | | | 133,057 | | | | 01/14/2021 | | | | 1,794 | |
Goldman Sachs Bank USA | | | USD | | | | 151 | | | | KRW | | | | 163,442 | | | | 01/14/2021 | | | | (397 | ) |
Goldman Sachs Bank USA | | | USD | | | | 189 | | | | RUB | | | | 14,593 | | | | 01/22/2021 | | | | 7,736 | |
JPMorgan Chase Bank, NA | | | USD | | | | 303 | | | | BRL | | | | 1,569 | | | | 02/02/2021 | | | | (867 | ) |
Morgan Stanley Capital Services, Inc. | | | JPY | | | | 71,041 | | | | USD | | | | 687 | | | | 02/26/2021 | | | | (1,035 | ) |
Natwest Markets PLC | | | USD | | | | 294 | | | | RUB | | | | 22,140 | | | | 01/22/2021 | | | | 4,603 | |
Standard Chartered Bank | | | INR | | | | 45,041 | | | | USD | | | | 609 | | | | 01/15/2021 | | | | (6,801 | ) |
Standard Chartered Bank | | | NOK | | | | 8,666 | | | | USD | | | | 939 | | | | 01/15/2021 | | | | (72,013 | ) |
Standard Chartered Bank | | | USD | | | | 514 | | | | INR | | | | 38,605 | | | | 01/15/2021 | | | | 14,066 | |
Standard Chartered Bank | | | USD | | | | 103 | | | | TWD | | | | 2,916 | | | | 01/27/2021 | | | | 822 | |
State Street Bank & Trust Co. | | | USD | | | | 2,424 | | | | AUD | | | | 3,389 | | | | 01/12/2021 | | | | 188,956 | |
State Street Bank & Trust Co. | | | SEK | | | | 7,693 | | | | USD | | | | 879 | | | | 01/15/2021 | | | | (56,153 | ) |
State Street Bank & Trust Co. | | | USD | | | | 212 | | | | INR | | | | 15,732 | | | | 01/15/2021 | | | | 2,779 | |
State Street Bank & Trust Co. | | | USD | | | | 289 | | | | NOK | | | | 2,551 | | | | 01/15/2021 | | | | 8,476 | |
State Street Bank & Trust Co. | | | USD | | | | 69 | | | | SEK | | | | 616 | | | | 01/15/2021 | | | | 5,669 | |
State Street Bank & Trust Co. | | | GBP | | | | 299 | | | | USD | | | | 401 | | | | 01/21/2021 | | | | (7,481 | ) |
State Street Bank & Trust Co. | | | USD | | | | 813 | | | | GBP | | | | 610 | | | | 01/21/2021 | | | | 21,662 | |
State Street Bank & Trust Co. | | | CHF | | | | 243 | | | | USD | | | | 271 | | | | 01/29/2021 | | | | (3,456 | ) |
State Street Bank & Trust Co. | | | USD | | | | 268 | | | | CHF | | | | 238 | | | | 01/29/2021 | | | | 1,325 | |
State Street Bank & Trust Co. | | | USD | | | | 226 | | | | CHF | | | | 200 | | | | 01/29/2021 | | | | (307 | ) |
State Street Bank & Trust Co. | | | USD | | | | 606 | | | | BRL | | | | 3,185 | | | | 02/02/2021 | | | | 7,219 | |
State Street Bank & Trust Co. | | | USD | | | | 519 | | | | ZAR | | | | 8,037 | | | | 02/04/2021 | | | | 25,715 | |
State Street Bank & Trust Co. | | | USD | | | | 269 | | | | MXN | | | | 5,349 | | | | 02/25/2021 | | | | (1,655 | ) |
State Street Bank & Trust Co. | | | JPY | | | | 35,459 | | | | USD | | | | 342 | | | | 02/26/2021 | | | | (1,389 | ) |
State Street Bank & Trust Co. | | | USD | | | | 362 | | | | JPY | | | | 37,474 | | | | 02/26/2021 | | | | 1,136 | |
State Street Bank & Trust Co. | | | EUR | | | | 379 | | | | USD | | | | 462 | | | | 03/17/2021 | | | | (1,629 | ) |
State Street Bank & Trust Co. | | | USD | | | | 217 | | | | EUR | | | | 178 | | | | 03/17/2021 | | | | 347 | |
State Street Bank & Trust Co. | | | USD | | | | 1,167 | | | | EUR | | | | 953 | | | | 03/17/2021 | | | | (1,008 | ) |
UBS AG | | | INR | | | | 40,269 | | | | USD | | | | 544 | | | | 01/15/2021 | | | | (6,535 | ) |
UBS AG | | | USD | | | | 2,353 | | | | CAD | | | | 3,012 | | | | 02/18/2021 | | | | 13,859 | |
UBS AG | | | EUR | | | | 10,243 | | | | USD | | | | 12,512 | | | | 03/17/2021 | | | | (21,256 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 240,640 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | | Non-income producing security. |
| (b) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the aggregate market value of these securities amounted to $3,409,036 or 5.7% of net assets. |
| (c) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (d) | | Affiliated investments. |
| (e) | | The rate shown represents the 7-day yield as of period end. |
| (f) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Currency Abbreviations:
AUD—Australian Dollar
BRL—Brazilian Real
CAD—Canadian Dollar
CHF—Swiss Franc
CNY—Chinese Yuan Renminbi
11
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
EUR—Euro
GBP—Great British Pound
INR—Indian Rupee
JPY—Japanese Yen
KRW—South Korean Won
MXN—Mexican Peso
NOK—Norwegian Krone
RUB—Russian Ruble
SEK—Swedish Krona
TWD—New Taiwan Dollar
USD—United States Dollar
ZAR—South African Rand
See notes to financial statements.
12
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $35,542,868) | | $ | 57,005,967 | (a) |
Affiliated issuers (cost $3,790,900—including investment of cash collateral for securities loaned of $2,334,903) | | | 3,790,900 | |
Foreign currencies, at value (cost $701,640) | | | 698,966 | |
Unrealized appreciation on forward currency exchange contracts | | | 467,120 | |
Receivable for investment securities sold and foreign currency transactions | | | 257,468 | |
Unaffiliated dividends receivable | | | 82,545 | |
Receivable for capital stock sold | | | 2,137 | |
Affiliated dividends receivable | | | 55 | |
| | | | |
Total assets | | | 62,305,158 | |
| | | | |
LIABILITIES | |
Payable for collateral received on securities loaned | | | 2,334,903 | |
Unrealized depreciation on forward currency exchange contracts | | | 226,480 | |
Payable for capital stock redeemed | | | 57,354 | |
Advisory fee payable | | | 34,390 | |
Administrative fee payable | | | 20,266 | |
Payable for investment securities purchased and foreign currency transactions | | | 7,141 | |
Distribution fee payable | | | 6,678 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 139,362 | |
| | | | |
Total liabilities | | | 2,826,720 | |
| | | | |
NET ASSETS | | $ | 59,478,438 | |
| | | | |
COMPOSITION OF NET ASSETS | |
Capital stock, at par | | $ | 2,177 | |
Additional paid-in capital | | | 32,602,036 | |
Distributable earnings | | | 26,874,225 | |
| | | | |
| | $ | 59,478,438 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 27,410,025 | | | | 994,661 | | | $ | 27.56 | |
| | | |
| B | | $ | 32,068,413 | | | | 1,182,481 | | | $ | 27.12 | |
| (a) | | Includes securities on loan with a value of $2,254,323 (see Note E). |
See notes to financial statements.
13
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $55,578) | | $ | 444,021 | |
Affiliated issuers | | | 8,332 | |
Securities lending income | | | 8,034 | |
| | | | |
| | | 460,387 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 387,492 | |
Distribution fee—Class B | | | 70,447 | |
Transfer agency—Class A | | | 1,831 | |
Transfer agency—Class B | | | 2,199 | |
Custody and accounting | | | 95,478 | |
Administrative | | | 75,346 | |
Audit and tax | | | 67,078 | |
Printing | | | 26,866 | |
Legal | | | 19,716 | |
Directors’ fees | | | 16,744 | |
Miscellaneous | | | 13,159 | |
| | | | |
Total expenses | | | 776,356 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (28,217 | ) |
| | | | |
Net expenses | | | 748,139 | |
| | | | |
Net investment loss | | | (287,752 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | |
Net realized gain (loss) on: | | | | |
Investment transactions | | | 5,737,800 | |
Forward currency exchange contracts | | | (607,853 | ) |
Foreign currency transactions | | | 45,620 | |
Net change in unrealized appreciation/depreciation of: | | | | |
Investments(a) | | | 8,966,469 | |
Forward currency exchange contracts | | | 163,315 | |
Foreign currency denominated assets and liabilities | | | (4,822 | ) |
| | | | |
Net gain on investment and foreign currency transactions | | | 14,300,529 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 14,012,777 | |
| | | | |
| (a) | | Net of increase in accrued foreign capital gains taxes of $51,983. |
See notes to financial statements.
14
| | |
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment income (loss) | | $ | (287,752 | ) | | $ | 134,740 | |
Net realized gain on investment and foreign currency transactions | | | 5,175,567 | | | | 4,692,498 | |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 9,124,962 | | | | 7,740,937 | |
| | | | | | | | |
Net increase in net assets from operations | | | 14,012,777 | | | | 12,568,175 | |
Distributions to Shareholders | |
Class A | | | (2,359,331 | ) | | | (688,238 | ) |
Class B | | | (2,741,392 | ) | | | (794,928 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net decrease | | | (3,312,483 | ) | | | (6,897,421 | ) |
| | | | | | | | |
Total increase | | | 5,599,571 | | | | 4,187,588 | |
NET ASSETS | |
Beginning of period | | | 53,878,867 | | | | 49,691,279 | |
| | | | | | | | |
End of period | | $ | 59,478,438 | | | $ | 53,878,867 | |
| | | | | | | | |
See notes to financial statements.
15
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB International Growth Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
16
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | |
Common Stocks: | | | | | | | | | | | | | | | | |
Information Technology | | $ | 2,577,229 | | | $ | 8,193,263 | | | $ | –0 | – | | $ | 10,770,492 | |
Industrials | | | 3,085,757 | | | | 6,792,096 | | | | –0 | – | | | 9,877,853 | |
Financials | | | 291,955 | | | | 9,074,482 | | | | –0 | – | | | 9,366,437 | |
Health Care | | | 2,979,917 | | | | 6,027,801 | | | | –0 | – | | | 9,007,718 | |
Consumer Staples | | | –0 | – | | | 4,811,890 | | | | –0 | – | | | 4,811,890 | |
Consumer Discretionary | | | 2,148,432 | | | | 2,215,296 | | | | –0 | – | | | 4,363,728 | |
Materials | | | –0 | – | | | 3,633,797 | | | | –0 | – | | | 3,633,797 | |
Communication Services | | | –0 | – | | | 2,025,353 | | | | –0 | – | | | 2,025,353 | |
Energy | | | –0 | – | | | 1,620,298 | | | | –0 | – | | | 1,620,298 | |
Utilities | | | –0 | – | | | 1,528,401 | | | | –0 | – | | | 1,528,401 | |
17
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Short-Term Investments | | $ | 1,455,997 | | | $ | –0 | – | | $ | –0 | – | | $ | 1,455,997 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 2,334,903 | | | | –0 | – | | | –0 | – | | | 2,334,903 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 14,874,190 | | | | 45,922,677 | (a) | | | –0 | – | | | 60,796,867 | |
Other Financial Instruments(b): | | | | | | | | | | | | | | | | |
Assets: | |
Forward Currency Exchange Contracts | | | –0 | – | | | 467,120 | | | | –0 | – | | | 467,120 | |
Liabilities: | |
Forward Currency Exchange Contracts | | | –0 | – | | | (226,480 | ) | | | –0 | – | | | (226,480 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 14,874,190 | | | $ | 46,163,317 | | | $ | –0 | – | | $ | 61,037,507 | |
| | | | | | | | | | | | | | | | |
| (a) | | 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. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
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, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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
18
| | |
| |
| | | AB Variable Products Series Fund |
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 contractually agreed to waive its management fee and/or bear expenses of the Portfolio in order to reduce the Portfolio’s total operating expenses by an amount equal to 0.05% on an annual basis of the average net assets for Class A and Class B. For the year ended December 31, 2020, such reimbursements/waivers amounted to $25,833. This fee waiver and/or expense reimbursement agreement extends through May 1, 2021 and then may be extended by the Adviser for additional one-year terms.
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, 2020, the reimbursement for such services amounted to $75,346.
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $2,146.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 1,750 | | | $ | 16,433 | | | $ | 16,727 | | | $ | 1,456 | | | $ | 8 | |
Government Money Market Portfolio* | | | 1,787 | | | | 22,085 | | | | 21,537 | | | | 2,335 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 3,791 | | | $ | 9 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
19
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 16,765,116 | | | $ | 26,447,180 | |
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 | | $ | 39,429,165 | |
| | | | |
Gross unrealized appreciation | | $ | 22,187,127 | |
Gross unrealized depreciation | | | (808,971 | ) |
| | | | |
Net unrealized appreciation | | $ | 21,378,156 | |
| | | | |
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 derivative 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”.
20
| | |
| |
| | | AB 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 forward currency exchange contracts. 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, 2020, 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”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 currency contracts | | Unrealized appreciation on forward currency exchange contracts | | $ | 467,120 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 226,480 | |
| | | | | | | | | | | | |
Total | | | | $ | 467,120 | | | | | $ | 226,480 | |
| | | | | | | | | | | | |
| | | | | | | | | | |
Derivative Type | | Location of Gain or (Loss) on Derivatives
Within Statement of Operations | | Realized Gain or
(Loss) on
Derivatives | | | Change in Unrealized
Appreciation or
(Depreciation) | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | $ | (607,853 | ) | | $ | 163,315 | |
| | | | | | | | | | |
Total | | | | $ | (607,853 | ) | | $ | 163,315 | |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 25,213,384 | |
Average principal amount of sale contracts | | $ | 21,377,210 | |
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.
21
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
All OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative
Assets Subject
to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Received* | | | Security Collateral
Received* | | | Net Amount of
Derivative
Assets | |
Bank of America, NA | | $ | 346 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 346 | |
Citibank, NA | | | 160,610 | | | | (35,658 | ) | | | –0 | – | | | –0 | – | | | 124,952 | |
Goldman Sachs Bank USA | | | 9,530 | | | | (397 | ) | | | –0 | – | | | –0 | – | | | 9,133 | |
Natwest Markets PLC | | | 4,603 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 4,603 | |
Standard Chartered Bank | | | 14,888 | | | | (14,888 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 263,284 | | | | (73,078 | ) | | | –0 | – | | | –0 | – | | | 190,206 | |
UBS AG | | | 13,859 | | | | (13,859 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 467,120 | | | $ | (137,880 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 329,240 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative
Liabilities Subject
to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Pledged* | | | Security Collateral
Pledged* | | | Net Amount of
Derivative
Liabilities | |
Barclays Bank PLC | | $ | 1,265 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 1,265 | |
Citibank, NA | | | 35,658 | | | | (35,658 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Deutsche Bank AG | | | 7,575 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 7,575 | |
Goldman Sachs Bank USA | | | 397 | | | | (397 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
JPMorgan Chase Bank, NA | | | 867 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 867 | |
Morgan Stanley Capital Services, Inc. | | | 1,035 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 1,035 | |
Standard Chartered Bank | | | 78,814 | | | | (14,888 | ) | | | –0 | – | | | –0 | – | | | 63,926 | |
State Street Bank & Trust Co. | | | 73,078 | | | | (73,078 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
UBS AG | | | 27,791 | | | | (13,859 | ) | | | –0 | – | | | –0 | – | | | 13,932 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 226,480 | | | $ | (137,880 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 88,600 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the
22
| | |
| |
| | | AB Variable Products Series Fund |
borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | |
| | | | | | | | | Government Money Market
Portfolio |
Market Value of
Securities on Loan* | | Cash
Collateral* | | Market Value of
Non-Cash
Collateral* | | Income from
Borrowers | | Income Earned | | Advisory Fee
Waived |
| $2,254,323 | | $2,334,903 | | $50,033 | | $6,900 | | $1,134 | | $238 |
| * | | As of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | |
Shares sold | | | 19,172 | | | | 25,049 | | | | | | | $ | 434,740 | | | $ | 530,484 | |
Shares issued in reinvestment of dividends | | | 102,313 | | | | 32,449 | | | | | | | | 2,359,331 | | | | 688,237 | |
Shares redeemed | | | (153,877 | ) | | | (163,992 | ) | | | | | | | (3,611,499 | ) | | | (3,492,546 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (32,392 | ) | | | (106,494 | ) | | | | | | $ | (817,428 | ) | | $ | (2,273,825 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | |
Shares sold | | | 108,028 | | | | 52,238 | | | | | | | $ | 2,392,079 | | | $ | 1,106,667 | |
Shares issued in reinvestment of dividends | | | 120,660 | | | | 37,998 | | | | | | | | 2,741,392 | | | | 794,929 | |
Shares redeemed | | | (331,740 | ) | | | (310,416 | ) | | | | | | | (7,628,526 | ) | | | (6,525,192 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (103,052 | ) | | | (220,180 | ) | | | | | | $ | (2,495,055 | ) | | $ | (4,623,596 | ) |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 80% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
23
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, 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 more difficult to trade 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, and because these investments may be 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- and mid-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 on the statement of assets and liabilities.
Leverage Risk—When the Portfolio borrows money or otherwise leverages its investments, its performance 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 or by borrowing money. The use of other types of derivative instruments by the Portfolio, such as 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.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
24
| | |
| |
| | | AB Variable Products Series Fund |
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 1,009,224 | | | $ | 211,048 | |
Net long-term capital gains | | | 4,091,499 | | | | 1,272,118 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 5,100,723 | | | $ | 1,483,166 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed capital gains | | $ | 5,551,679 | |
Unrealized appreciation/(depreciation) | | | 21,322,546 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 26,874,225 | |
| | | | |
| (a) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments and the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, 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 increase in distributable earnings 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.
25
| | |
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $23.49 | | | | $18.99 | | | | $23.15 | | | | $17.34 | | | | $18.62 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a)(b) | | | (.10 | ) | | | .08 | | | | .15 | | | | .06 | | | | .11 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | 6.65 | | | | 5.08 | | | | (4.16 | ) | | | 6.00 | | | | (1.39 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 6.55 | | | | 5.16 | | | | (4.01 | ) | | | 6.06 | | | | (1.28 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.34 | ) | | | (.13 | ) | | | (.15 | ) | | | (.25 | ) | | | –0 | – |
Distributions from net realized gain on investment transactions | | | (2.14 | ) | | | (.53 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (2.48 | ) | | | (.66 | ) | | | (.15 | ) | | | (.25 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $27.56 | | | | $23.49 | | | | $18.99 | | | | $23.15 | | | | $17.34 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 29.94 | % | | | 27.53 | % | | | (17.41 | )% | | | 35.02 | % | | | (6.87 | )%† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $27,410 | | | | $24,123 | | | | $21,522 | | | | $30,318 | | | | $26,045 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.31 | % | | | 1.36 | % | | | 1.27 | % | | | 1.24 | % | | | 1.27 | % |
Expenses, before waivers/reimbursements | | | 1.37 | % | | | 1.41 | % | | | 1.29 | % | | | 1.24 | % | | | 1.27 | % |
Net investment income (loss) (b) | | | (.42 | )% | | | .40 | % | | | .69 | % | | | .30 | % | | | .60 | %† |
Portfolio turnover rate | | | 34 | % | | | 49 | % | | | 33 | % | | | 52 | % | | | 52 | % |
See footnote summary on page 27.
26
| | |
| |
| | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $23.15 | | | | $18.71 | | | | $22.80 | | | | $17.09 | | | | $18.39 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a)(b) | | | (.15 | ) | | | .03 | | | | .09 | | | | .01 | | | | .07 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | 6.54 | | | | 5.00 | | | | (4.09 | ) | | | 5.90 | | | | (1.37 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 6.39 | | | | 5.03 | | | | (4.00 | ) | | | 5.91 | | | | (1.30 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.28 | ) | | | (.06 | ) | | | (.09 | ) | | | (.20 | ) | | | –0 | – |
Distributions from net realized gain on investment transactions | | | (2.14 | ) | | | (.53 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (2.42 | ) | | | (.59 | ) | | | (.09 | ) | | | (.20 | ) | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $27.12 | | | | $23.15 | | | | $18.71 | | | | $22.80 | | | | $17.09 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 29.60 | % | | | 27.23 | % | | | (17.60 | )% | | | 34.63 | % | | | (7.07 | )%† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $32,068 | | | | $29,756 | | | | $28,169 | | | | $41,007 | | | | $32,843 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.56 | % | | | 1.61 | % | | | 1.52 | % | | | 1.49 | % | | | 1.52 | % |
Expenses, before waivers/reimbursements | | | 1.62 | % | | | 1.66 | % | | | 1.54 | % | | | 1.49 | % | | | 1.52 | % |
Net investment income (loss) (b) | | | (.67 | )% | | | .15 | % | | | .43 | % | | | .04 | % | | | .37 | %† |
Portfolio turnover rate | | | 34 | % | | | 49 | % | | | 33 | % | | | 52 | % | | | 52 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (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. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total
Return |
| $.04 | | .22% | | .23% |
| * | | 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, 2017 and December 31, 2016 by .01% and .09%, respectively. |
See notes to financial statements.
27
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB International Growth Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB International Growth Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
28
| | |
| | |
| | |
| |
| 2020 TAX INFORMATION (unaudited) | | AB 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, 2020. For Corporate shareholders, 2.03% of dividends paid qualify for the dividends received deduction. The Portfolio designates $4,091,499 of dividends paid as long-term capital gain dividends.
The Portfolio intends to make an election to pass through foreign taxes to its shareholders. For the taxable year ended December 31, 2020, $23,628 of foreign taxes may be passed through and the associated foreign source income for information reporting purposes is $485,530.
29
| | |
| | |
| | |
| |
| INTERNATIONAL GROWTH PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Daniel C. Roarty(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 (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 Thematic and Sustainable Equities Investment Team. Mr. Roarty is the investment professional with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
30
| | |
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| MANAGEMENT OF THE FUND | | AB 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 INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| | | | | | | | |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith,#
1345 Avenue of the Americas
New York, NY 10105
60
(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. | | | 74 | | | None |
| | | | | | | | |
| DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,##
Chairman of the Board
79
(2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership experience and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
31
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Jorge A. Bermudez,##
69
(2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
| | | | | | | | |
Michael J. Downey,##
77
(2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,##
72
(2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
32
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Jeanette W. Loeb,##
68
(2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen,##
65
(2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody,##
68
(2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
33
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
DISINTERESTED DIRECTORS
(continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner,##
81
(2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for the Portfolio’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
34
| | |
| |
| | | AB 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^
60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Daniel C. Roarty
49 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of Sustainable Thematic Equities. |
| | | | |
Emilie D. Wrapp
65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes 44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo
61 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke
60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto
56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
35
| | |
| | |
| | |
| |
| INTERNATIONAL GROWTH PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
36
| | |
| | | |
| INTERNATIONAL GROWTH PORTFOLIO |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB International Growth Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
37
| | |
| INTERNATIONAL GROWTH PORTFOLIO |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review and their discussion with the Adviser of the reasons for the Fund’s underperformance in certain periods, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with that for another fund advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional clients. In this regard, the Adviser noted, among other things, that, compared to institutional accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
38
| | |
| |
| | | AB Variable Products Series Fund |
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the medians, after giving effect to a voluntary waiver by the Adviser. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
39
VPS-IG-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS SERIES FUND, INC.
| + | | INTERNATIONAL VALUE PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| INTERNATIONAL VALUE PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—International Value Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
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 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 the Adviser—in securities of non-US 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 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 (“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 5 shows the Portfolio’s performance compared to its benchmark, the Morgan Stanley Capital International Europe, Australasia and the Far East (“MSCI EAFE”) Index (net), for the one-, five- and 10-year periods ended December 31, 2020.
During the annual period, all share classes of the Portfolio underperformed the benchmark. Security selection drove underperformance, relative to the benchmark, due to selection within the industrials and consumer-staples sectors. Selection within utilities and technology was positive. Overall sector selection contributed to performance. Losses from an overweight to energy and an underweight to health care detracted and partially offset gains from an overweight to technology and an underweight to financials. In terms of country positioning (a result of bottom-up security analysis driven by fundamental research), an underweight to Japan detracted while an overweight to South Korea added.
The Portfolio used derivatives in the form of forwards for hedging purposes, which detracted from absolute returns during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Non-US equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly
1
| | |
| |
| | | AB Variable Products Series Fund |
outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio’s Senior Investment Management Team (the “Team”) has continued to identify opportunities against a changing market backdrop. The Team has flexibility to adjust the Portfolio’s positions in real time when warranted, and to maintain conviction through short-term volatility. As markets face new uncertainties, the Team believes that this disciplined approach is the best way to capture the long-term potential for equities.
2
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The MSCI EAFE Index is unmanaged and 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 US and Canada. 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. Net returns reflect the reinvestment of dividends after the deduction of non-US withholding tax. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s value approach, may underperform the market generally.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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, and because these investments may be 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 difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Leverage Risk: When the Portfolio borrows money or otherwise leverages its portfolio, 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. 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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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
(Disclosures, Risks and Note About Historical Performance continued on next page)
3
| | |
| | |
| DISCLOSURES AND RISKS | | |
| |
| (continued) | | AB Variable Products Series Fund |
information, call your financial advisor or (800) 227 4618. 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.
4
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARK | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| International Value Portfolio Class A2 | | | 2.46% | | | | 2.95% | | | | 2.39% | |
| | | |
| International Value Portfolio Class B2 | | | 2.21% | | | | 2.67% | | | | 2.12% | |
| | | |
| MSCI EAFE Index (net) | | | 7.82% | | | | 7.45% | | | | 5.51% | |
1 Average annual returns. 2 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, 2020 by 0.04%. | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual expense ratios as 0.90% 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in International Value Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmark. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on pages 3-4.
5
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | |
Class A | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,255.30 | | | $ | 5.22 | | | | 0.92 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.51 | | | $ | 4.67 | | | | 0.92 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,252.60 | | | $ | 6.62 | | | | 1.17 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.25 | | | $ | 5.94 | | | | 1.17 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
6
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Roche Holding AG | | $ | 14,454,386 | | | | 4.2 | % |
Samsung Electronics Co., Ltd. | | | 9,559,207 | | | | 2.8 | |
Peugeot SA | | | 9,056,242 | | | | 2.7 | |
AerCap Holdings NV | | | 8,248,203 | | | | 2.4 | |
GlaxoSmithKline PLC | | | 8,052,567 | | | | 2.4 | |
EDP—Energias de Portugal SA | | | 7,709,518 | | | | 2.3 | |
Alstom SA | | | 7,152,347 | | | | 2.1 | |
Faurecia SE | | | 6,696,012 | | | | 2.0 | |
Enel SpA | | | 6,627,004 | | | | 1.9 | |
Suncorp Group Ltd. | | | 6,469,500 | | | | 1.9 | |
| | | | | | | | | |
| | | $ | 84,024,986 | | | | 24.7 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 58,491,581 | | | | 17.4 | % |
Consumer Discretionary | | | 48,937,555 | | | | 14.6 | |
Industrials | | | 41,969,452 | | | | 12.5 | |
Information Technology | | | 40,300,704 | | | | 12.0 | |
Consumer Staples | | | 33,004,063 | | | | 9.8 | |
Health Care | | | 32,121,990 | | | | 9.5 | |
Materials | | | 26,168,277 | | | | 7.8 | |
Communication Services | | | 21,606,828 | | | | 6.4 | |
Utilities | | | 14,336,522 | | | | 4.3 | |
Real Estate | | | 10,222,403 | | | | 3.0 | |
Energy | | | 8,657,097 | | | | 2.6 | |
Short-Term Investments | | | 318,739 | | | | 0.1 | |
| | | | | | | | | |
Total Investments | | $ | 336,135,211 | | | | 100.0 | % |
| 2 | | 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 derivative transactions, which may be used for hedging or investment purposes (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
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| COUNTRY BREAKDOWN1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COUNTRY | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Japan | | $ | 64,516,931 | | | | 19.2 | % |
United Kingdom | | | 46,827,669 | | | | 13.9 | |
France | | | 41,032,814 | | | | 12.2 | |
Australia | | | 24,769,280 | | | | 7.4 | |
Switzerland | | | 19,709,588 | | | | 5.9 | |
Ireland | | | 17,962,305 | | | | 5.3 | |
South Korea | | | 15,612,648 | | | | 4.6 | |
Germany | | | 15,545,521 | | | | 4.6 | |
Italy | | | 13,741,189 | | | | 4.1 | |
Netherlands | | | 11,777,841 | | | | 3.5 | |
Portugal | | | 7,709,518 | | | | 2.3 | |
Denmark | | | 7,130,294 | | | | 2.1 | |
Hong Kong | | | 6,205,704 | | | | 1.9 | |
Other | | | 43,275,170 | | | | 12.9 | |
Short-Term Investments | | | 318,739 | | | | 0.1 | |
| | | | | | | | | |
Total Investments | | $ | 336,135,211 | | | | 100.0 | % |
| 1 | | All data are as of December 31, 2020. 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 1.8% or less in the following: Austria, Belgium, Canada, China, Israel, Macau, Norway, Spain, Sweden and Taiwan. |
8
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.3% | | | | | | | | |
FINANCIALS–17.1% | | | | | | | | |
BANKS–9.5% | | | | | | | | |
Bank Hapoalim BM(a) | | | 422,030 | | | $ | 2,898,603 | |
Bank Leumi Le-Israel BM | | | 465,060 | | | | 2,745,136 | |
Bank of Ireland Group PLC(a) | | | 1,517,291 | | | | 6,125,285 | |
Erste Group Bank AG(a) | | | 192,560 | | | | 5,865,900 | |
KBC Group NV(a) | | | 85,830 | | | | 6,006,483 | |
Mediobanca Banca di Credito Finanziario SpA | | | 366,730 | | | | 3,394,756 | |
Westpac Banking Corp. | | | 350,950 | | | | 5,222,599 | |
| | | | | | | | |
| | | | | | | 32,258,762 | |
| | | | | | | | |
CAPITAL MARKETS–1.5% | | | | | | | | |
Credit Suisse Group AG | | | 407,037 | | | | 5,255,202 | |
| | | | | | | | |
CONSUMER FINANCE–0.0% | | | | | | | | |
Isracard Ltd. | | | 1 | | | | 3 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–0.9% | | | | | | | | |
ORIX Corp. | | | 203,100 | | | | 3,124,513 | |
| | | | | | | | |
INSURANCE–5.2% | | | | | | | | |
Allianz SE | | | 25,370 | | | | 6,232,720 | |
NN Group NV | | | 119,150 | | | | 5,150,881 | |
Suncorp Group Ltd.(b) | | | 859,680 | | | | 6,469,500 | |
| | | | | | | | |
| | | | | | | 17,853,101 | |
| | | | | | | | |
| | | | | | | 58,491,581 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–14.3% | | | | | | | | |
AUTO COMPONENTS–2.9% | | | | | | | | |
Faurecia SE(a) | | | 130,688 | | | | 6,696,012 | |
NGK Spark Plug Co., Ltd. | | | 179,100 | | | | 3,058,482 | |
| | | | | | | | |
| | | | | | | 9,754,494 | |
| | | | | | | | |
AUTOMOBILES–5.1% | | | | | | | | |
Peugeot SA(a)(b) | | | 330,693 | | | | 9,056,242 | |
Subaru Corp. | | | 182,900 | | | | 3,659,631 | |
Suzuki Motor Corp. | | | 104,300 | | | | 4,834,879 | |
| | | | | | | | |
| | | | | | | 17,550,752 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–2.5% | | | | | | | | |
Entain PLC(a) | | | 354,780 | | | | 5,502,923 | |
Galaxy Entertainment Group Ltd. | | | 399,000 | | | | 3,106,030 | |
| | | | | | | | |
| | | | | | | 8,608,953 | |
| | | | | | | | |
HOUSEHOLD DURABLES–2.7% | | | | | | | | |
Persimmon PLC | | | 108,280 | | | | 4,086,789 | |
Sony Corp. | | | 51,700 | | | | 5,209,705 | |
| | | | | | | | |
| | | | | | | 9,296,494 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–1.1% | | | | | | | | |
Pandora A/S | | | 33,300 | | | | 3,726,862 | |
| | | | | | | | |
| | | | | | | 48,937,555 | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INDUSTRIALS–12.3% | | | | | | | | |
AEROSPACE & DEFENSE–2.0% | | | | | | | | |
Airbus SE(a) | | | 29,070 | | | $ | 3,190,262 | |
Saab AB–Class B(a)(b) | | | 124,200 | | | | 3,613,742 | |
| | | | | | | | |
| | | | | | | 6,804,004 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–2.5% | | | | | | | | |
Fuji Electric Co., Ltd. | | | 131,200 | | | | 4,735,799 | |
Prysmian SpA | | | 104,500 | | | | 3,719,429 | |
| | | | | | | | |
| | | | | | | 8,455,228 | |
| | | | | | | | |
MACHINERY–2.9% | | | | | | | | |
Alstom SA(a) | | | 125,570 | | | | 7,152,347 | |
Weichai Power Co., Ltd.–Class H | | | 1,401,000 | | | | 2,817,011 | |
| | | | | | | | |
| | | | | | | 9,969,358 | |
| | | | | | | | |
PROFESSIONAL SERVICES–0.9% | | | | | | | | |
UT Group Co., Ltd.(a) | | | 102,200 | | | | 3,181,551 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–4.0% | | | | | | | | |
AerCap Holdings NV(a) | | | 180,961 | | | | 8,248,203 | |
Ashtead Group PLC | | | 112,760 | | | | 5,311,108 | |
| | | | | | | | |
| | | | | | | 13,559,311 | |
| | | | | | | | |
| | | | | | | 41,969,452 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–11.8% | | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–0.6% | | | | | | | | |
Zhen Ding Technology Holding Ltd. | | | 519,000 | | | | 2,111,993 | |
| | | | | | | | |
IT SERVICES–1.5% | | | | | | | | |
Atos SE(a) | | | 56,540 | | | | 5,162,985 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–4.6% | | | | | | | | |
NXP Semiconductors NV | | | 24,410 | | | | 3,881,434 | |
SCREEN Holdings Co., Ltd. | | | 76,600 | | | | 5,648,827 | |
SK Hynix, Inc.(a) | | | 55,420 | | | | 6,053,441 | |
| | | | | | | | |
| | | | | | | 15,583,702 | |
| | | | | | | | |
SOFTWARE–2.3% | | | | | | | | |
Avast PLC(c) | | | 650,290 | | | | 4,774,933 | |
Open Text Corp. | | | 68,396 | | | | 3,107,884 | |
| | | | | | | | |
| | | | | | | 7,882,817 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–2.8% | | | | | | | | |
Samsung Electronics Co., Ltd. | | | 128,010 | | | | 9,559,207 | |
| | | | | | | | |
| | | | | | | 40,300,704 | |
| | | | | | | | |
9
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
CONSUMER STAPLES–9.7% | | | | | | | | |
BEVERAGES–1.0% | | | | | | | | |
Carlsberg AS–Class B | | | 21,230 | | | $ | 3,403,432 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–2.2% | | | | | | | | |
Koninklijke Ahold Delhaize NV | | | 97,320 | | | | 2,745,526 | |
Tesco PLC(b) | | | 1,470,820 | | | | 4,641,565 | |
| | | | | | | | |
| | | | | | | 7,387,091 | |
| | | | | | | | |
FOOD PRODUCTS–4.6% | | | | | | | | |
Morinaga & Co., Ltd./Japan | | | 50,600 | | | | 1,903,407 | |
Nichirei Corp. | | | 109,100 | | | | 3,065,684 | |
Salmar ASA | | | 78,510 | | | | 4,599,955 | |
WH Group Ltd.(c) | | | 7,400,500 | | | | 6,205,704 | |
| | | | | | | | |
| | | | | | | 15,774,750 | |
| | | | | | | | |
TOBACCO–1.9% | | | | | | | | |
British American Tobacco PLC | | | 173,380 | | | | 6,438,790 | |
| | | | | | | | |
| | | | | | | 33,004,063 | |
| | | | | | | | |
HEALTH CARE–9.4% | | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–0.8% | | | | | | | | |
ConvaTec Group PLC(c) | | | 1,055,299 | | | | 2,874,699 | |
| | | | | | | | |
PHARMACEUTICALS–8.6% | | | | | | | | |
GlaxoSmithKline PLC | | | 440,080 | | | | 8,052,567 | |
Nippon Shinyaku Co., Ltd. | | | 37,200 | | | | 2,441,803 | |
Roche Holding AG | | | 41,500 | | | | 14,454,386 | |
Sanofi | | | 44,350 | | | | 4,298,535 | |
| | | | | | | | |
| | | | | | | 29,247,291 | |
| | | | | | | | |
| | | | | | | 32,121,990 | |
| | | | | | | | |
MATERIALS–7.7% | | | | | | | | |
CHEMICALS–3.5% | | | | | | | | |
Evonik Industries AG | | | 131,970 | | | | 4,313,377 | |
Tosoh Corp. | | | 345,100 | | | | 5,391,898 | |
Zeon Corp. | | | 148,300 | | | | 2,130,355 | |
| | | | | | | | |
| | | | | | | 11,835,630 | |
| | | | | | | | |
CONSTRUCTION MATERIALS–1.1% | | | | | | | | |
CRH PLC(a)(b) | | | 84,390 | | | | 3,588,817 | |
| | | | | | | | |
METALS & MINING–3.1% | | | | | | | | |
Agnico Eagle Mines Ltd. | | | 41,056 | | | | 2,889,628 | |
BlueScope Steel Ltd. | | | 391,098 | | | | 5,281,690 | |
Northern Star Resources Ltd.(b) | | | 263,200 | | | | 2,572,512 | |
| | | | | | | | |
| | | | | | | 10,743,830 | |
| | | | | | | | |
| | | | | | | 26,168,277 | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMUNICATION SERVICES–6.3% | | | | | | | | |
DIVERSIFIED TELECOMMUNICATION SERVICES–3.1% | | | | | | | | |
Nippon Telegraph & Telephone Corp. | | | 207,900 | | | $ | 5,334,502 | |
Orange SA | | | 460,010 | | | | 5,476,431 | |
| | | | | | | | |
| | | | | | | 10,810,933 | |
| | | | | | | | |
ENTERTAINMENT–2.4% | | | | | | | | |
Konami Holdings Corp. | | | 66,800 | | | | 3,758,583 | |
Nintendo Co., Ltd. | | | 6,800 | | | | 4,365,200 | |
| | | | | | | | |
| | | | | | | 8,123,783 | |
| | | | | | | | |
INTERACTIVE MEDIA & SERVICES–0.8% | | | | | | | | |
Dip Corp. | | | 100,000 | | | | 2,672,112 | |
| | | | | | | | |
| | | | | | | 21,606,828 | |
| | | | | | | | |
UTILITIES–4.2% | | | | | | | | |
ELECTRIC UTILITIES–4.2% | | | | | | | | |
EDP–Energias de Portugal SA | | | 1,228,314 | | | | 7,709,518 | |
Enel SpA | | | 651,320 | | | | 6,627,004 | |
| | | | | | | | |
| | | | | | | 14,336,522 | |
| | | | | | | | |
REAL ESTATE–3.0% | | | | | | | | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS)–1.5% | | | | | | | | |
Vicinity Centres(b) | | | 4,224,106 | | | | 5,222,979 | |
| | | | | | | | |
REAL ESTATE MANAGEMENT & DEVELOPMENT–1.5% | | | | | | | | |
Aroundtown SA | | | 670,530 | | | | 4,999,424 | |
| | | | | | | | |
| | | | | | | 10,222,403 | |
| | | | | | | | |
ENERGY–2.5% | | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–2.5% | | | | | | | | |
Repsol SA(b) | | | 337,217 | | | | 3,397,164 | |
Royal Dutch Shell PLC (Euronext Amsterdam)–Class A | | | 292,240 | | | | 5,144,295 | |
| | | | | | | | |
| | | | | | | 8,541,459 | |
| | | | | | | | |
Total Common Stocks
(cost $287,727,593) | | | | | | | 335,700,834 | |
| | | | | | | | |
RIGHTS–0.1% | | | | | | | | |
ENERGY–0.1% | | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–0.1% | | | | | | | | |
Repsol SA, expiring 01/08/2021(a)
(cost $118,344) | | | 337,217 | | | | 115,638 | |
| | | | | | | | |
10
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–0.1% | | | | | | | | |
INVESTMENT COMPANIES–0.1% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(d)(e)(f)
(cost $318,739) | | | 318,739 | | | $ | 318,739 | |
| | | | | | | | |
TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL FOR SECURITIES LOANED–98.5%
(cost $288,164,676) | | | | | | | 336,135,211 | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.5% | | | | | | | | |
INVESTMENT COMPANIES–1.5% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(d)(e)(f)
(cost $5,168,698) | | | 5,168,698 | | | $ | 5,168,698 | |
| | | | | | | | |
TOTAL INVESTMENTS–100.0%
(cost $293,333,374) | | | | | | | 341,303,909 | |
| | | | | | | | |
Other assets less
liabilities–0.0% | | | | | | | 105,083 | |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 341,408,992 | |
| | | | | | | | |
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 | | | | 5,880 | | | | SEK | | | | 51,831 | | | | 01/15/2021 | | | $ | 420,504 | |
Bank of America, NA | | | USD | | | | 864 | | | | GBP | | | | 650 | | | | 01/21/2021 | | | | 24,580 | |
Bank of America, NA | | | EUR | | | | 680 | | | | USD | | | | 834 | | | | 03/17/2021 | | | | 2,181 | |
Barclays Bank PLC | | | GBP | | | | 1,515 | | | | USD | | | | 2,035 | | | | 01/21/2021 | | | | (36,967 | ) |
Barclays Bank PLC | | | USD | | | | 767 | | | | GBP | | | | 575 | | | | 01/21/2021 | | | | 19,317 | |
Barclays Bank PLC | | | USD | | | | 5,068 | | | | TWD | | | | 141,382 | | | | 01/27/2021 | | | | (19,674 | ) |
Barclays Bank PLC | | | USD | | | | 1,431 | | | | JPY | | | | 147,814 | | | | 02/26/2021 | | | | 1,312 | |
Barclays Bank PLC | | | USD | | | | 544 | | | | JPY | | | | 56,029 | | | | 02/26/2021 | | | | (1,247 | ) |
BNP Paribas SA | | | USD | | | | 551 | | | | GBP | | | | 412 | | | | 01/21/2021 | | | | 11,702 | |
Citibank, NA | | | KRW | | | | 11,602,386 | | | | USD | | | | 10,200 | | | | 01/14/2021 | | | | (465,029 | ) |
Citibank, NA | | | ILS | | | | 16,074 | | | | USD | | | | 4,774 | | | | 01/21/2021 | | | | (229,439 | ) |
Citibank, NA | | | TWD | | | | 176,820 | | | | USD | | | | 6,305 | | | | 01/27/2021 | | | | (8,512 | ) |
Citibank, NA | | | CHF | | | | 2,443 | | | | USD | | | | 2,681 | | | | 01/29/2021 | | | | (80,521 | ) |
Citibank, NA | | | USD | | | | 1,878 | | | | CNY | | | | 12,294 | | | | 02/10/2021 | | | | 4,516 | |
Citibank, NA | | | USD | | | | 15,040 | | | | JPY | | | | 1,565,274 | | | | 02/26/2021 | | | | 128,506 | |
Credit Suisse International | | | USD | | | | 2,857 | | | | NOK | | | | 25,868 | | | | 01/15/2021 | | | | 160,016 | |
Goldman Sachs Bank USA | | | USD | | | | 3,125 | | | | SGD | | | | 4,248 | | | | 01/07/2021 | | | | 89,155 | |
Goldman Sachs Bank USA | | | KRW | | | | 1,175,410 | | | | USD | | | | 1,061 | | | | 01/14/2021 | | | | (19,553 | ) |
Goldman Sachs Bank USA | | | NOK | | | | 16,100 | | | | USD | | | | 1,875 | | | | 01/15/2021 | | | | (2,871 | ) |
Goldman Sachs Bank USA | | | TWD | | | | 12,945 | | | | USD | | | | 458 | | | | 01/27/2021 | | | | (4,086 | ) |
Morgan Stanley & Co., Inc. | | | AUD | | | | 1,030 | | | | USD | | | | 748 | | | | 01/12/2021 | | | | (46,036 | ) |
Morgan Stanley & Co., Inc. | | | USD | | | | 570 | | | | SEK | | | | 5,028 | | | | 01/15/2021 | | | | 41,482 | |
Morgan Stanley Capital Services, Inc. | | | AUD | | | | 2,085 | | | | USD | | | | 1,527 | | | | 01/12/2021 | | | | (81,038 | ) |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 921 | | | | AUD | | | | 1,209 | | | | 01/12/2021 | | | | 11,272 | |
Morgan Stanley Capital Services, Inc. | | | KRW | | | | 1,098,055 | | | | USD | | | | 995 | | | | 01/14/2021 | | | | (13,918 | ) |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 1,837 | | | | GBP | | | | 1,385 | | | | 01/21/2021 | | | | 57,625 | |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 12,234 | | | | CHF | | | | 11,101 | | | | 01/29/2021 | | | | 314,426 | |
Morgan Stanley Capital Services, Inc. | | | USD | | | | 801 | | | | NZD | | | | 1,124 | | | | 03/05/2021 | | | | 7,591 | |
11
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Counterparty | | Contracts to
Deliver
(000) | | | In Exchange
For
(000) | | | Settlement
Date | | | Unrealized
Appreciation/
(Depreciation) | |
Morgan Stanley Capital Services, Inc. | | | KRW | | | | 1,007,983 | | | | USD | | | | 927 | | | | 04/22/2021 | | | $ | 648 | |
Societe Generale | | | HKD | | | | 57,487 | | | | USD | | | | 7,416 | | | | 02/24/2021 | | | | (519 | ) |
Standard Chartered Bank | | | USD | | | | 1,038 | | | | AUD | | | | 1,399 | | | | 01/12/2021 | | | | 41,017 | |
Standard Chartered Bank | | | KRW | | | | 2,910,144 | | | | USD | | | | 2,650 | | | | 01/14/2021 | | | | (24,488 | ) |
Standard Chartered Bank | | | USD | | | | 4,757 | | | | KRW | | | | 5,311,087 | | | | 01/14/2021 | | | | 124,928 | |
Standard Chartered Bank | | | NOK | | | | 33,422 | | | | USD | | | | 3,620 | | | | 01/15/2021 | | | | (277,730 | ) |
Standard Chartered Bank | | | USD | | | | 2,962 | | | | CAD | | | | 3,775 | | | | 02/18/2021 | | | | 4,254 | |
State Street Bank & Trust Co. | | | AUD | | | | 2,615 | | | | USD | | | | 1,875 | | | | 01/12/2021 | | | | (140,705 | ) |
State Street Bank & Trust Co. | | | USD | | | | 1,554 | | | | AUD | | | | 2,163 | | | | 01/12/2021 | | | | 113,326 | |
State Street Bank & Trust Co. | | | USD | | | | 1,708 | | | | NOK | | | | 15,527 | | | | 01/15/2021 | | | | 103,190 | |
State Street Bank & Trust Co. | | | USD | | | | 876 | | | | SEK | | | | 7,577 | | | | 01/15/2021 | | | | 45,216 | |
State Street Bank & Trust Co. | | | USD | | | | 2,304 | | | | GBP | | | | 1,726 | | | | 01/21/2021 | | | | 57,666 | |
State Street Bank & Trust Co. | | | USD | | | | 908 | | | | ILS | | | | 3,040 | | | | 01/21/2021 | | | | 38,544 | |
State Street Bank & Trust Co. | | | USD | | | | 350 | | | | JPY | | | | 36,050 | | | | 02/26/2021 | | | | (612 | ) |
UBS AG | | | KRW | | | | 1,020,734 | | | | USD | | | | 940 | | | | 01/14/2021 | | | | 1,579 | |
UBS AG | | | USD | | | | 1,696 | | | | TRY | | | | 13,150 | | | | 01/21/2021 | | | | 63,604 | |
UBS AG | | | CAD | | | | 7,282 | | | | USD | | | | 5,688 | | | | 02/18/2021 | | | | (33,506 | ) |
UBS AG | | | EUR | | | | 13,859 | | | | USD | | | | 16,930 | | | | 03/17/2021 | | | | (28,760 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | $ | 372,946 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| (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 restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the aggregate market value of these securities amounted to $13,855,336 or 4.1% of net assets. |
| (d) | | Affiliated investments. |
| (e) | | The rate shown represents the 7-day yield as of period end. |
| (f) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Currency Abbreviations:
AUD—Australian Dollar
CAD—Canadian Dollar
CHF—Swiss Franc
CNY—Chinese Yuan Renminbi
EUR—Euro
GBP—Great British Pound
HKD—Hong Kong Dollar
ILS—Israeli Shekel
JPY—Japanese Yen
KRW—South Korean Won
NOK—Norwegian Krone
NZD—New Zealand Dollar
SEK—Swedish Krona
SGD—Singapore Dollar
TRY—Turkish Lira
TWD—New Taiwan Dollar
USD—United States Dollar
Glossary:
REIT—Real Estate Investment Trust
See notes to financial statements.
12
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $287,845,937) | | $ | 335,816,472 | (a) |
Affiliated issuers (cost $5,487,437—including investment of cash collateral for securities loaned of $5,168,698) | | | 5,487,437 | |
Cash collateral due from broker | | | 530,000 | |
Foreign currencies, at value (cost $1,886,633) | | | 1,897,743 | |
Receivable for investment securities sold and foreign currency transactions | | | 2,052,811 | |
Unrealized appreciation on forward currency exchange contracts | | | 1,888,157 | |
Unaffiliated dividends receivable | | | 1,162,412 | |
Receivable for capital stock sold | | | 21,870 | |
Affiliated dividends receivable | | | 31 | |
| | | | |
Total assets | | | 348,856,933 | |
| | | | |
LIABILITIES | |
Payable for collateral received on securities loaned | | | 5,168,698 | |
Unrealized depreciation on forward currency exchange contracts | | | 1,515,211 | |
Advisory fee payable | | | 214,103 | |
Payable for capital stock redeemed | | | 149,376 | |
Payable for investment securities purchased and foreign currency transactions | | | 73,649 | |
Distribution fee payable | | | 62,664 | |
Administrative fee payable | | | 20,476 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 243,618 | |
| | | | |
Total liabilities | | | 7,447,941 | |
| | | | |
NET ASSETS | | $ | 341,408,992 | |
| | | | |
COMPOSITION OF NET ASSETS | |
Capital stock, at par | | $ | 23,781 | |
Additional paid-in capital | | | 331,011,441 | |
Distributable earnings | | | 10,373,770 | |
| | | | |
| | $ | 341,408,992 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 41,994,315 | | | | 2,906,631 | | | $ | 14.45 | |
| | | |
| B | | $ | 299,414,677 | | | | 20,874,716 | | | $ | 14.34 | |
| (a) | | Includes securities on loan with a value of $31,564,598 (see Note E). |
See notes to financial statements.
13
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
INVESTMENT INCOME | | | | | | | | |
Dividends | | | | | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $853,687) | | $ | 7,185,997 | | | | | |
Affiliated issuers | | | 24,499 | | | | | |
Securities lending income | | | 132,880 | | | $ | 7,343,376 | |
| | | | | | | | |
EXPENSES | | | | | | | | |
Advisory fee (see Note B) | | | 2,344,671 | | | | | |
Distribution fee—Class B | | | 681,171 | | | | | |
Transfer agency—Class A | | | 836 | | | | | |
Transfer agency—Class B | | | 5,668 | | | | | |
Custody and accounting | | | 151,339 | | | | | |
Printing | | | 131,200 | | | | | |
Administrative | | | 73,980 | | | | | |
Audit and tax | | | 66,358 | | | | | |
Legal | | | 36,580 | | | | | |
Directors’ fees | | | 20,677 | | | | | |
Miscellaneous | | | 32,521 | | | | | |
| | | | | | | | |
Total expenses | | | 3,545,001 | | | | | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (6,647 | ) | | | | |
| | | | | | | | |
Net expenses | | | | | | | 3,538,354 | |
| | | | | | | | |
Net investment income | | | | | | | 3,805,022 | |
| | | | | | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS | | | | | | | | |
Net realized gain (loss) on: | | | | | | | | |
Investment transactions | | | | | | | (11,776,577 | ) |
Forward currency exchange contracts | | | | | | | (214,293 | ) |
Foreign currency transactions | | | | | | | 36,187 | |
Net change in unrealized appreciation/depreciation of: | | | | | | | | |
Investments | | | | | | | 13,237,452 | |
Forward currency exchange contracts | | | | | | | 457,279 | |
Foreign currency denominated assets and liabilities | | | | | | | 57,157 | |
| | | | | | | | |
Net gain on investment and foreign currency transactions | | | | | | | 1,797,205 | |
| | | | | | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | | | | | $ | 5,602,227 | |
| | | | | | | | |
| See | | notes to financial statements. |
14
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | |
Net investment income | | $ | 3,805,022 | | | $ | 7,052,641 | |
Net realized loss on investment and foreign currency transactions | | | (11,954,683 | ) | | | (26,021,678 | ) |
Net change in unrealized appreciation/depreciation of investments and foreign currency denominated assets and liabilities | | | 13,751,888 | | | | 77,391,768 | |
| | | | | | | | |
Net increase in net assets from operations | | | 5,602,227 | | | | 58,422,731 | |
Distributions to Shareholders | |
Class A | | | (699,773 | ) | | | (479,446 | ) |
Class B | | | (4,157,435 | ) | | | (2,522,410 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net decrease | | | (36,959,684 | ) | | | (44,607,256 | ) |
| | | | | | | | |
Total increase (decrease) | | | (36,214,665 | ) | | | 10,813,619 | |
NET ASSETS | |
Beginning of period | | | 377,623,657 | | | | 366,810,038 | |
| | | | | | | | |
End of period | | $ | 341,408,992 | | | $ | 377,623,657 | |
| | | | | | | | |
See notes to financial statements.
15
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB International Value Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
16
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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) |
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.
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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | |
Common Stocks: | | | | | | | | | | | | | | | | |
Financials | | $ | –0 | – | | $ | 58,491,581 | | | $ | –0 | – | | $ | 58,491,581 | |
Consumer Discretionary | | | –0 | – | | | 48,937,555 | | | | –0 | – | | | 48,937,555 | |
Industrials | | | 8,248,203 | | | | 33,721,249 | | | | –0 | – | | | 41,969,452 | |
Information Technology | | | 6,989,318 | | | | 33,311,386 | | | | –0 | – | | | 40,300,704 | |
Consumer Staples | | | –0 | – | | | 33,004,063 | | | | –0 | – | | | 33,004,063 | |
Health Care | | | 2,874,699 | | | | 29,247,291 | | | | –0 | – | | | 32,121,990 | |
Materials | | | 2,889,628 | | | | 23,278,649 | | | | –0 | – | | | 26,168,277 | |
Communication Services | | | –0 | – | | | 21,606,828 | | | | –0 | – | | | 21,606,828 | |
17
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Utilities | | $ | –0 | – | | $ | 14,336,522 | | | $ | –0 | – | | $ | 14,336,522 | |
Real Estate | | | –0 | – | | | 10,222,403 | | | | –0 | – | | | 10,222,403 | |
Energy | | | –0 | – | | | 8,541,459 | | | | –0 | – | | | 8,541,459 | |
Rights | | | 115,638 | | | | –0 | – | | | –0 | – | | | 115,638 | |
Short-Term Investments | | | 318,739 | | | | –0 | – | | | –0 | – | | | 318,739 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 5,168,698 | | | | –0 | – | | | –0 | – | | | 5,168,698 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 26,604,923 | | | | 314,698,986 | (a) | | | –0 | – | | | 341,303,909 | |
Other Financial Instruments(b): | | | | | | | | | | | | | | | | |
Assets: | |
Forward Currency Exchange Contracts | | | –0 | – | | | 1,888,157 | | | | –0 | – | | | 1,888,157 | |
Liabilities: | |
Forward Currency Exchange Contracts | | | –0 | – | | | (1,515,211 | ) | | | –0 | – | | | (1,515,211 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | 26,604,923 | | | $ | 315,071,932 | | | $ | –0 | – | | $ | 341,676,855 | |
| | | | | | | | | | | | | | | | |
| (a) | | 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. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
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, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
18
| | |
| |
| | | AB 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. 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 (the “Expense Caps”) 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, 2020, 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, 2020, the reimbursement for such services amounted to $73,980.
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $4,363.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases at
Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 3,053 | | | $ | 88,469 | | | $ | 91,204 | | | $ | 318 | | | $ | 24 | |
Government Money Market Portfolio* | | | 3,846 | | | | 168,074 | | | | 166,751 | | | | 5,169 | | | | 13 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 5,487 | | | $ | 37 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in
19
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 165,938,705 | | | $ | 204,515,175 | |
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 | | $ | 295,294,207 | |
| | | | |
Gross unrealized appreciation | | $ | 64,843,978 | |
Gross unrealized depreciation | | | (18,777,912 | ) |
| | | | |
Net unrealized appreciation | | $ | 46,066,066 | |
| | | | |
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 derivative 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
20
| | |
| |
| | | AB Variable Products Series Fund |
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 forward currency exchange contracts. 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, 2020, 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”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to OTC 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 OTC counterparty certain derivative financial instruments’ 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. In the event of a default by an OTC 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 ISDA 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 OTC 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. If OTC derivatives were held at period end, please refer to netting arrangements by the OTC counterparty table below for additional details.
During the year ended December 31, 2020, 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 currency contracts | | Unrealized appreciation on forward currency exchange contracts | | $ | 1,888,157 | | | Unrealized depreciation on forward currency exchange contracts | | $ | 1,515,211 | |
| | | | | | | | | | | | |
Total | | | | $ | 1,888,157 | | | | | $ | 1,515,211 | |
| | | | | | | | | | | | |
| | | | | | | | | | |
Derivative Type | | Location of Gain or
(Loss) on Derivatives Within
Statement of Operations | | Realized Gain
or (Loss) on
Derivatives | | | Change in Unrealized
Appreciation or
(Depreciation) | |
Foreign currency contracts | | Net realized gain (loss) on forward currency exchange contracts; Net change in unrealized appreciation/depreciation of forward currency exchange contracts | | $ | (214,293 | ) | | $ | 457,279 | |
| | | | | | | | | | |
Total | | | | $ | (214,293 | ) | | $ | 457,279 | |
| | | | | | | | | | |
The following table represents the average monthly volume of the Portfolio’s derivative transactions during the year ended December 31, 2020:
| | | | |
Forward Currency Exchange Contracts: | | | | |
Average principal amount of buy contracts | | $ | 114,005,049 | |
Average principal amount of sale contracts | | $ | 112,224,513 | |
21
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 OTC derivatives held at period end were subject to netting arrangements. The following table presents the Portfolio’s derivative assets and liabilities by OTC counterparty net of amounts available for offset under ISDA Master Agreements (“MA”) and net of the related collateral received/pledged by the Portfolio as of December 31, 2020. Exchange-traded derivatives and centrally cleared swaps are not subject to netting arrangements and as such are excluded from the table.
| | | | | | | | | | | | | | | | | | | | |
Counterparty | | Derivative Assets
Subject to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Received* | | | Security Collateral
Received* | | | Net Amount of
Derivative
Assets | |
Bank of America, NA | | $ | 447,265 | | | $ | –0 | – | | $ | –0 | – | | $ | –0 | – | | $ | 447,265 | |
Barclays Bank PLC | | | 20,629 | | | | (20,629 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
BNP Paribas SA | | | 11,702 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 11,702 | |
Citibank, NA | | | 133,022 | | | | (133,022 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Credit Suisse International | | | 160,016 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 160,016 | |
Goldman Sachs Bank USA | | | 89,155 | | | | (26,510 | ) | | | –0 | – | | | –0 | – | | | 62,645 | |
Morgan Stanley & Co., Inc./Morgan Stanley Capital Services, Inc. | | | 433,044 | | | | (140,992 | ) | | | –0 | – | | | –0 | – | | | 292,052 | |
Standard Chartered Bank | | | 170,199 | | | | (170,199 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
State Street Bank & Trust Co. | | | 357,942 | | | | (141,317 | ) | | | –0 | – | | | –0 | – | | | 216,625 | |
UBS AG | | | 65,183 | | | | (62,266 | ) | | | –0 | – | | | –0 | – | | | 2,917 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,888,157 | | | $ | (694,935 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 1,193,222 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| | | | | |
Counterparty | | Derivative Liabilities
Subject to a MA | | | Derivatives
Available for
Offset | | | Cash Collateral
Pledged* | | | Security Collateral
Pledged* | | | Net Amount of
Derivative
Liabilities | |
Barclays Bank PLC | | $ | 57,888 | | | $ | (20,629 | ) | | $ | –0 | – | | $ | –0 | – | | $ | 37,259 | |
Citibank, NA | | | 783,501 | | | | (133,022 | ) | | | (530,000 | ) | | | –0 | – | | | 120,479 | |
Goldman Sachs Bank USA | | | 26,510 | | | | (26,510 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Morgan Stanley & Co., Inc./Morgan Stanley Capital Services, Inc. | | | 140,992 | | | | (140,992 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
Societe Generale | | | 519 | | | | –0 | – | | | –0 | – | | | –0 | – | | | 519 | |
Standard Chartered Bank | | | 302,218 | | | | (170,199 | ) | | | –0 | – | | | –0 | – | | | 132,019 | |
State Street Bank & Trust Co. | | | 141,317 | | | | (141,317 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
UBS AG | | | 62,266 | | | | (62,266 | ) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 1,515,211 | | | $ | (694,935 | ) | | $ | (530,000 | ) | | $ | –0 | – | | $ | 290,276 | ^ |
| | | | | | | | | | | | | | | | | | | | |
| * | | The actual collateral received/pledged may be more than the amount reported due to over-collateralization. |
| ^ | | 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-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include
22
| | |
| |
| | | AB Variable Products Series Fund |
only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value of
Securities on Loan* | | | Cash Collateral* | | | Market Value of
Non-Cash
Collateral* | | | Income from
Borrowers | | | Government Money Market
Portfolio | |
| | Income Earned | | | Advisory Fee
Waived | |
| $ | 31,564,598 | | | $ | 5,168,698 | | | $ | 28,259,542 | | | $ | 119,816 | | | $ | 13,064 | | | $ | 2,284 | |
| * | | As of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | |
Shares sold | | | 486,449 | | | | 269,460 | | | | | | | $ | 5,692,849 | | | $ | 3,601,306 | |
Shares issued in reinvestment of dividends | | | 54,029 | | | | 34,173 | | | | | | | | 699,773 | | | | 479,446 | |
Shares redeemed | | | (1,395,831 | ) | | | (1,163,389 | ) | | | | | | | (17,164,618 | ) | | | (15,571,410 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (855,353 | ) | | | (859,756 | ) | | | | | | $ | (10,771,996 | ) | | $ | (11,490,658 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | |
Shares sold | | | 2,131,892 | | | | 1,317,796 | | | | | | | $ | 23,010,244 | | | $ | 17,290,885 | |
Shares issued in reinvestment of dividends | | | 323,268 | | | | 181,338 | | | | | | | | 4,157,435 | | | | 2,522,410 | |
Shares redeemed | | | (4,300,841 | ) | | | (3,961,184 | ) | | | | | | | (53,355,367 | ) | | | (52,929,893 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (1,845,681 | ) | | | (2,462,050 | ) | | | | | | $ | (26,187,688 | ) | | $ | (33,116,598 | ) |
| | | | | | | | | | | | | | | | | | | | |
23
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
At December 31, 2020, certain shareholders of the Portfolio owned 53% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s value approach, 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 more difficult to trade 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, and because these investments may be 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—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 on the statement of assets and liabilities.
Leverage Risk—When the Portfolio borrows money or otherwise leverages its investments, its performance 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 or by borrowing money. The use of other types of derivative instruments by the Portfolio, such as 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.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
24
| | |
| |
| | | AB Variable Products Series Fund |
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 4,857,208 | | | $ | 3,001,856 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 4,857,208 | | | $ | 3,001,856 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 1,553,477 | |
Accumulated capital and other losses | | | (37,298,260 | )(a) |
Unrealized appreciation/(depreciation) | | | 46,118,553 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 10,373,770 | |
| | | | |
| (a) | | As of December 30, 2020, the Portfolio had a net capital loss carryforward of $37,298,260. |
| (b) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the recognition for tax purposes of unrealized gains/losses on certain derivative instruments, the tax treatment of passive foreign investment companies (PFICs), and the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 30, 2020, the Portfolio had a net short-term capital loss carryforward of $1,878,991 and a net long-term capital loss carryforward of $35,419,269, which may be carried forward for an indefinite period.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings 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.
25
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $14.37 | | | | $12.38 | | | | $16.30 | | | | $13.28 | | | | $13.52 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .18 | | | | .28 | | | | .25 | | | | .31 | | | | .30 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .14 | | | | 1.84 | | | | (3.94 | ) | | | 3.06 | | | | (.37 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .32 | | | | 2.12 | | | | (3.69 | ) | | | 3.37 | | | | (.07 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.24 | ) | | | (.13 | ) | | | (.23 | ) | | | (.35 | ) | | | (.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $14.45 | | | | $14.37 | | | | $12.38 | | | | $16.30 | | | | $13.28 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 2.46 | % | | | 17.14 | % | | | (22.79 | )% | | | 25.42 | % | | | (.50 | )%† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $41,994 | | | | $54,042 | | | | $57,234 | | | | $53,014 | | | | $47,385 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | .91 | % | | | .90 | % | | | .86 | % | | | .85 | % | | | .86 | % |
Expenses, before waivers/reimbursements | | | .92 | % | | | .90 | % | | | .87 | % | | | .86 | % | | | .86 | % |
Net investment income (b) | | | 1.47 | % | | | 2.10 | % | | | 1.65 | % | | | 2.05 | % | | | 2.27 | %† |
Portfolio turnover rate | | | 54 | % | | | 44 | % | | | 42 | % | | | 45 | % | | | 64 | % |
See footnote summary on page 27.
26
| | |
| |
| | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $14.24 | | | | $12.29 | | | | $16.15 | | | | $13.16 | | | | $13.41 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .14 | | | | .24 | | | | .23 | | | | .27 | | | | .27 | † |
Net realized and unrealized gain (loss) on investment and foreign currency transactions | | | .15 | | | | 1.82 | | | | (3.92 | ) | | | 3.02 | | | | (.38 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .29 | | | | 2.06 | | | | (3.69 | ) | | | 3.29 | | | | (.11 | ) |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.19 | ) | | | (.11 | ) | | | (.17 | ) | | | (.30 | ) | | | (.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $14.34 | | | | $14.24 | | | | $12.29 | | | | $16.15 | | | | $13.16 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 2.21 | % | | | 16.79 | % | | | (22.98 | )% | | | 25.09 | % | | | (.80 | )%† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $299,415 | | | | $323,582 | | | | $309,576 | | | | $432,885 | | | | $460,086 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.16 | % | | | 1.15 | % | | | 1.11 | % | | | 1.10 | % | | | 1.11 | % |
Expenses, before waivers/reimbursements | | | 1.17 | % | | | 1.15 | % | | | 1.11 | % | | | 1.11 | % | | | 1.11 | % |
Net investment income (b) | | | 1.18 | % | | | 1.84 | % | | | 1.50 | % | | | 1.83 | % | | | 2.04 | %† |
Portfolio turnover rate | | | 54 | % | | | 44 | % | | | 42 | % | | | 45 | % | | | 64 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (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. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment Income Per Share | | Net Investment Income Ratio | | Total Return |
| $.002 | | .01% | | .01% |
| * | | 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, 2020, December 31, 2019, December 31, 2017, and December 31, 2016 by .04%, .18%, .01% and .07%, respectively. |
See notes to financial statements.
27
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB International Value Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB International Value Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
28
| | |
| | |
| | |
| |
| 2020 TAX INFORMATION (unaudited) | | AB 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, 2020.
The Portfolio intends to make an election to pass through foreign taxes to its shareholders. For the taxable year ended December 31, 2020, $504,602 of foreign taxes may be passed through and the associated foreign source income for information reporting purposes is $8,039,684.
29
| | |
| | |
| | |
| |
| INTERNATIONAL VALUE PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Tawhid Ali(2), Vice President Avi Lavi(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 (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 International Value Senior Investment Management Team. Messrs. Ali and Lavi are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
30
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| |
| MANAGEMENT OF THE FUND | | AB 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 AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
| INTERESTED DIRECTOR | | | | | | | | |
| | | | | | | | |
Robert M. Keith,#
1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| INDEPENDENT DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,##
Chairman of the Board
79
(2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership, and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
Jorge A. Bermudez,##
69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
31
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
INDEPENDENT DIRECTORS (continued) |
| | | | | | | | |
Michael J. Downey,##
77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,##
72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
Jeanette W. Loeb,##
68
(2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen,##
65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
32
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*, AGE AND (YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS IN AB FUND COMPLEX OVERSEEN BY DIRECTOR | | | OTHER PUBLIC COMPANY DIRECTORSHIPS CURRENTLY HELD BY DIRECTOR |
INDEPENDENT DIRECTORS (continued) |
| | | | | | | | |
Garry L. Moody,##
68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
| | | | | | | | |
Earl D. Weiner,##
81
(2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
33
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB 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^
60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Tawhid Ali
49 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of European Value Equities. |
| | | | |
Avi Lavi
54 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since December 2016. |
| | | | |
Emilie D. Wrapp
65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes
44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo
61 | | Treasurer and Chief
Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke
60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto
56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
34
| | |
| | |
| | |
| |
| INTERNATIONAL VALUE PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
35
| | |
| | |
| INTERNATIONAL VALUE PORTFOLIO |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB International Value Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
36
| | |
| |
| | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review and their discussion with the Adviser of the reasons for the Fund’s underperformance in the periods reviewed, the directors concluded that the Fund’s investment performance was acceptable. The directors determined to continue to monitor the Fund’s performance closely.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with those for two other funds advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profit-
37
| | |
| INTERNATIONAL VALUE PORTFOLIO | | |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
ability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The Adviser had agreed to cap the Fund’s expenses, but the directors noted that the Fund’s expense ratio was currently below the level of the Adviser’s cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. The directors noted that the Fund’s expense ratio was above the peer group median. After reviewing and discussing the Adviser’s explanations of the reasons for this, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
38
VPS-IV-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS
SERIES FUND, INC.
| + | | LARGE CAP GROWTH PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| LARGE CAP GROWTH PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Large Cap Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio’s investment objective is long-term growth of capital. The Portfolio invests primarily in equity securities of a limited number of large, carefully selected, high-quality US companies. The Portfolio invests primarily in the domestic equity securities of companies selected by the Adviser for their growth potential within various market sectors. The Portfolio emphasizes investments in large, seasoned companies. Under normal circumstances, the Portfolio invests at least 80% of its net assets in common stocks of large-capitalization companies.
The Adviser expects that normally the Portfolio’s portfolio will tend to emphasize investments in securities issued by US 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 (“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, as well as 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, 2020.
All share classes of the Portfolio underperformed the primary benchmark and outperformed the S&P 500 Index for the annual period. Sector selection detracted, relative to the primary benchmark, due to an underweight to the technology sector and an overweight to health care. Underweights to industrials and real estate offset losses somewhat. Overall stock selection was positive. Selection within health care and consumer staples contributed, while selection within consumer discretionary and technology detracted.
The Portfolio did not utilize derivatives during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio’s Senior Investment Management Team (the “Team”) follows a bottom-up stock-picking methodology that seeks to identify companies that meet its 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. The Team remains laser-focused in identifying companies that generate high return on assets with high reinvestment-rate opportunities.
1
| | |
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The Russell 1000® Growth Index and the S&P 500® Index are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 1000 Growth Index represents the performance of large-cap growth companies within the US. The S&P 500 Index includes 500 US stocks and is a common representation of the performance of the overall US 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, 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-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Industry/Sector Risk: Investments in a particular sector, industry or group of related industries may have more risk because market or economic factors affecting that sector or 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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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
| | |
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARKS | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Large Cap Growth Portfolio Class A | | | 35.49% | | | | 20.45% | | | | 17.43% | |
| | | |
| Large Cap Growth Portfolio Class B | | | 35.15% | | | | 20.15% | | | | 17.14% | |
| | | |
| Primary Benchmark: Russell 1000 Growth Index | | | 38.49% | | | | 21.00% | | | | 17.21% | |
| | | |
| S&P 500 Index | | | 18.40% | | | | 15.22% | | | | 13.88% | |
1 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 0.69% and 0.94% for Class A and Class B shares, respectively. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.68% and 0.93% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 TO 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Large Cap Growth Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on page 2.
3
| | |
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | | | Total
Expenses Paid
During Period+ | | | Total
Annualized
Expense Ratio+ | |
Class A | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,216.00 | | | $ | 3.68 | | | | 0.66 | % | | $ | 3.73 | | | | 0.67 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,021.82 | | | $ | 3.35 | | | | 0.66 | % | | $ | 3.40 | | | | 0.67 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,214.60 | | | $ | 5.07 | | | | 0.91 | % | | $ | 5.12 | | | | 0.92 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.56 | | | $ | 4.62 | | | | 0.91 | % | | $ | 4.67 | | | | 0.92 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
| + | | In connection with the Portfolio’s investments in affiliated/unaffiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated/unaffiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses of the affiliated underlying portfolios. The Portfolio’s total expenses are equal to the classes’ annualized expense ratio plus the Portfolio’s pro rata share of the weighted average expense ratio of the affiliated/unaffiliated underlying portfolios in which it invests, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
4
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Microsoft Corp. | | $ | 54,560,071 | | | | 7.3 | % |
Alphabet, Inc.—Class C | | | 51,417,678 | | | | 6.9 | |
UnitedHealth Group, Inc. | | | 37,343,562 | | | | 5.0 | |
Facebook, Inc. | | | 36,241,776 | | | | 4.9 | |
Amazon.com, Inc. | | | 36,217,062 | | | | 4.9 | |
Visa, Inc. | | | 34,746,573 | | | | 4.6 | |
Zoetis, Inc. | | | 27,352,350 | | | | 3.7 | |
Monster Beverage Corp. | | | 25,601,054 | | | | 3.4 | |
Intuitive Surgical, Inc. | | | 24,300,024 | | | | 3.3 | |
Vertex Pharmaceuticals, Inc. | | | 23,211,897 | | | | 3.1 | |
| | | | | | | | | |
| | | $ | 350,992,047 | | | | 47.1 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Information Technology | | $ | 231,822,528 | | | | 30.9 | % |
Health Care | | | 181,585,515 | | | | 24.2 | |
Communication Services | | | 112,731,754 | | | | 15.0 | |
Consumer Discretionary | | | 97,862,554 | | | | 13.1 | |
Consumer Staples | | | 40,538,874 | | | | 5.4 | |
Industrials | | | 33,089,966 | | | | 4.4 | |
Materials | | | 12,580,924 | | | | 1.7 | |
Financials | | | 1,798,153 | | | | 0.3 | |
Short-Term Investments | | | 37,156,551 | | | | 5.0 | |
| | | | | | | | | |
Total Investments | | $ | 749,166,819 | | | | 100.0 | % |
| 2 | | 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
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
| Company | | Shares | | |
U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–95.6% | | | | | | | | |
INFORMATION TECHNOLOGY–31.1% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.8% | | | | | | | | |
Arista Networks, Inc.(a) | | | 10,083 | | | $ | 2,929,818 | |
Motorola Solutions, Inc. | | | 17,919 | | | | 3,047,305 | |
| | | | | | | | |
| | | | | | | 5,977,123 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–2.2% | | | | | | | | |
Amphenol Corp.–Class A | | | 38,216 | | | | 4,997,506 | |
Cognex Corp. | | | 47,742 | | | | 3,832,967 | |
IPG Photonics Corp.(a) | | | 35,036 | | | | 7,840,706 | |
| | | | | | | | |
| | | | | | | 16,671,179 | |
| | | | | | | | |
IT SERVICES–7.7% | | | | | | | | |
EPAM Systems, Inc.(a) | | | 3,310 | | | | 1,186,139 | |
PayPal Holdings, Inc.(a) | | | 90,252 | | | | 21,137,018 | |
Visa, Inc.–Class A(b) | | | 158,856 | | | | 34,746,573 | |
| | | | | | | | |
| | | | | | | 57,069,730 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–8.2% | | | | | | | | |
ASML Holding NV ADR | | | 20,770 | | | | 10,129,944 | |
NVIDIA Corp. | | | 17,689 | | | | 9,237,196 | |
QUALCOMM, Inc. | | | 134,772 | | | | 20,531,167 | |
Texas Instruments, Inc. | | | 25,530 | | | | 4,190,239 | |
Xilinx, Inc. | | | 119,290 | | | | 16,911,743 | |
| | | | | | | | |
| | | | | | | 61,000,289 | |
| | | | | | | | |
SOFTWARE–12.2% | | | | | | | | |
Adobe, Inc.(a) | | | 30,200 | | | | 15,103,624 | |
ANSYS, Inc.(a) | | | 5,125 | | | | 1,864,475 | |
Fortinet, Inc.(a) | | | 73,171 | | | | 10,868,089 | |
Microsoft Corp. | | | 245,302 | | | | 54,560,071 | |
Paycom Software, Inc.(a) | | | 8,230 | | | | 3,722,017 | |
Tyler Technologies, Inc.(a) | | | 11,422 | | | | 4,985,931 | |
| | | | | | | | |
| | | | | | | 91,104,207 | |
| | | | | | | | |
| | | | | | | 231,822,528 | |
| | | | | | | | |
HEALTH CARE–24.4% | | | | | | | | |
BIOTECHNOLOGY–1.4% | | | | | | | | |
Regeneron Pharmaceuticals, Inc.(a) | | | 21,404 | | | | 10,340,486 | |
| | | | | | | | |
HEALTH CARE MANAGEMENT SERVICES–5.0% | | | | | | | | |
UnitedHealth Group, Inc. | | | 106,489 | | | | 37,343,562 | |
| | | | | | | | |
HEALTH CARE TECHNOLOGY–0.8% | | | | | | | | |
Veeva Systems, Inc.–Class A(a) | | | 22,747 | | | | 6,192,871 | |
| | | | | | | | |
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES–4.3% | | | | | | | | |
ABIOMED, Inc.(a) | | | 10,040 | | | | 3,254,968 | |
| | | | | | | | |
Align Technology, Inc.(a) | | | 26,720 | | | | 14,278,634 | |
Edwards Lifesciences Corp.(a) | | | 162,078 | | | | 14,786,376 | |
| | | | | | | | |
| | | | | | | 32,319,978 | |
| | | | | | | | |
MEDICAL EQUIPMENT–5.6% | | | | | | | | |
IDEXX Laboratories, Inc.(a) | | | 22,148 | | | | 11,071,121 | |
Illumina, Inc.(a) | | | 16,170 | | | | 5,982,900 | |
Intuitive Surgical, Inc.(a) | | | 29,703 | | | | 24,300,024 | |
| | | | | | | | |
| | | | | | | 41,354,045 | |
| | | | | | | | |
PHARMACEUTICALS–6.8% | | | | | | | | |
Vertex Pharmaceuticals, Inc.(a) | | | 98,214 | | | | 23,211,897 | |
Zoetis, Inc. | | | 165,271 | | | | 27,352,350 | |
| | | | | | | | |
| | | | | | | 50,564,247 | |
| | | | | | | | |
SCIENTIFIC INSTRUMENTS: GAUGES & METERS–0.5% | | | | | | | | |
Mettler-Toledo International, Inc.(a) | | | 3,045 | | | | 3,470,326 | |
| | | | | | | | |
| | | | | | | 181,585,515 | |
| | | | | | | | |
COMMUNICATION SERVICES–15.1% | | | | | | | | |
COMPUTER SERVICES, SOFTWARE & SYSTEMS–11.8% | | | | | | | | |
Alphabet, Inc.–Class C(a) | | | 29,350 | | | | 51,417,678 | |
Facebook, Inc.–Class A(a) | | | 132,676 | | | | 36,241,776 | |
| | | | | | | | |
| | | | | | | 87,659,454 | |
| | | | | | | | |
ELECTRONIC ENTERTAINMENT–3.3% | | | | | | | | |
Electronic Arts, Inc. | | | 126,342 | | | | 18,142,711 | |
Take-Two Interactive Software, Inc.(a) | | | 33,349 | | | | 6,929,589 | |
| | | | | | | | |
| | | | | | | 25,072,300 | |
| | | | | | | | |
| | | | | | | 112,731,754 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–13.1% | | | | | | | | |
DIVERSIFIED RETAIL–5.5% | | | | | | | | |
Amazon.com, Inc.(a) | | | 11,120 | | | | 36,217,062 | |
Etsy, Inc.(a) | | | 29,328 | | | | 5,217,744 | |
| | | | | | | | |
| | | | | | | 41,434,806 | |
| | | | | | | | |
HOTELS RESTAURANTS & LEISURE–0.9% | | | | | | | | |
Domino’s Pizza, Inc. | | | 16,800 | | | | 6,442,128 | |
| | | | | | | | |
SPECIALTY RETAIL–4.0% | | | | | | | | |
Burlington Stores, Inc.(a) | | | 17,660 | | | | 4,618,973 | |
Home Depot, Inc. (The) | | | 74,640 | | | | 19,825,877 | |
TJX Cos., Inc. (The) | | | 76,468 | | | | 5,222,000 | |
| | | | | | | | |
| | | | | | | 29,666,850 | |
| | | | | | | | |
TEXTILES, APPAREL & SHOES–2.7% | | | | | | | | |
NIKE, Inc.–Class B | | | 143,626 | | | | 20,318,770 | |
| | | | | | | | |
| | | | | | | 97,862,554 | |
| | | | | | | | |
6
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
| Company | | Shares | | |
U.S. $ Value | |
| | | | | | | | |
CONSUMER STAPLES–5.5% | | | | | | | | |
BEVERAGE: SOFT DRINKS–3.5% | | | | | | | | |
Monster Beverage Corp.(a) | | | 276,828 | | | $ | 25,601,054 | |
| | | | | | | | |
DIVERSIFIED RETAIL–2.0% | | | | | | | | |
Costco Wholesale Corp. | | | 39,646 | | | | 14,937,820 | |
| | | | | | | | |
| | | | | | | 40,538,874 | |
| | | | | | | | |
INDUSTRIALS–4.5% | | | | | | | | |
BACK OFFICE SUPPORT, HR & CONSULTING–1.3% | | | | | | | | |
Copart, Inc.(a) | | | 75,318 | | | | 9,584,216 | |
| | | | | | | | |
SCIENTIFIC INSTRUMENTS: CONTROL & FILTER–2.7% | | | | | | | | |
Allegion PLC | | | 53,504 | | | | 6,226,795 | |
IDEX Corp. | | | 14,585 | | | | 2,905,332 | |
Roper Technologies, Inc. | | | 25,044 | | | | 10,796,218 | |
| | | | | | | | |
| | | | | | | 19,928,345 | |
| | | | | | | | |
SCIENTIFIC INSTRUMENTS: ELECTRICAL–0.5% | | | | | | | | |
AMETEK, Inc. | | | 29,580 | | | | 3,577,405 | |
| | | | | | | | |
| | | | | | | 33,089,966 | |
| | | | | | | | |
MATERIALS–1.7% | | | | | | | | |
CHEMICALS–1.7% | | | | | | | | |
Sherwin-Williams Co. (The) | | | 17,119 | | | | 12,580,924 | |
| | | | | | | | |
FINANCIALS–0.2% | | | | | | | | |
FINANCIAL DATA & SYSTEMS–0.2% | | | | | | | | |
S&P Global, Inc. | | | 5,470 | | | | 1,798,153 | |
| | | | | | | | |
Total Common Stocks
(cost $358,032,173) | | | | | | | 712,010,268 | |
| | | | | | | | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–5.0% | | | | | | | | |
INVESTMENT COMPANIES–5.0% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(c)(d)(e)
(cost $37,156,551) | | | 37,156,551 | | | | 37,156,551 | |
| | | | | | | | |
TOTAL INVESTMENTS–100.6%
(cost $395,188,724) | | | | | | | 749,166,819 | |
Other assets less liabilities–(0.6)% | | | | | | | (4,604,146 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 744,562,673 | |
| | | | | | | | |
| (a) | | Non-income producing security. |
| (b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (c) | | Affiliated investments. |
| (d) | | The rate shown represents the 7-day yield as of period end. |
| (e) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Glossary:
ADR—American Depositary Receipt
See notes to financial statements.
7
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $358,032,173) | | $ | 712,010,268 | (a) |
Affiliated issuers (cost $37,156,551) | | | 37,156,551 | |
Receivable for capital stock sold | | | 120,764 | |
Unaffiliated dividends receivable | | | 24,302 | |
Affiliated dividends receivable | | | 1,023 | |
| | | | |
Total assets | | | 749,312,908 | |
| | | | |
LIABILITIES | |
Payable for investment securities purchased | | | 2,542,566 | |
Payable for capital stock redeemed | | | 1,609,127 | |
Advisory fee payable | | | 369,533 | |
Distribution fee payable | | | 85,867 | |
Administrative fee payable | | | 20,350 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses and other liabilities | | | 122,646 | |
| | | | |
Total liabilities | | | 4,750,235 | |
| | | | |
NET ASSETS | | $ | 744,562,673 | |
| | | | |
COMPOSITION OF NET ASSETS | |
Capital stock, at par | | $ | 10,076 | |
Additional paid-in capital | | | 334,296,855 | |
Distributable earnings | | | 410,255,742 | |
| | | | |
| | $ | 744,562,673 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 331,436,226 | | | | 4,299,209 | | | $ | 77.09 | |
| | | |
| B | | $ | 413,126,447 | | | | 5,777,012 | | | $ | 71.51 | |
| (a) | | Includes securities on loan with a value of $5,538,681 (see Note E). |
See notes to financial statements.
8
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $8,009) | | $ | 3,461,124 | |
Affiliated issuers | | | 178,413 | |
Securities lending income | | | 18,100 | |
| | | | |
| | | 3,657,637 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 3,793,713 | |
Distribution fee—Class B | | | 873,403 | |
Transfer agency—Class A | | | 3,769 | |
Transfer agency—Class B | | | 4,655 | |
Custody and accounting | | | 123,814 | |
Administrative | | | 73,665 | |
Printing | | | 64,775 | |
Legal | | | 48,592 | |
Audit and tax | | | 44,863 | |
Directors’ fees | | | 25,597 | |
Miscellaneous | | | 39,315 | |
| | | | |
Total expenses | | | 5,096,161 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (35,974 | ) |
| | | | |
Net expenses | | | 5,060,187 | |
| | | | |
Net investment loss | | | (1,402,550 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 59,629,586 | |
Net change in unrealized appreciation/depreciation of investments | | | 138,582,497 | |
| | | | |
Net gain on investment transactions | | | 198,212,083 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 196,809,533 | |
| | | | |
See notes to financial statements.
9
| | |
| | | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31, 2020 | | | Year Ended
December 31, 2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment loss | | $ | (1,402,550 | ) | | $ | (226,586 | ) |
Net realized gain on investment transactions | | | 59,629,586 | | | | 47,852,291 | |
Net change in unrealized appreciation/depreciation of investments | | | 138,582,497 | | | | 97,257,200 | |
| | | | | | | | |
Net increase in net assets from operations | | | 196,809,533 | | | | 144,882,905 | |
Distributions to Shareholders | | | | | | | | |
Class A | | | (21,647,747 | ) | | | (30,469,954 | ) |
Class B | | | (28,746,560 | ) | | | (39,025,095 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase | | | 11,225,885 | | | | 102,607,285 | |
| | | | | | | | |
Total increase | | | 157,641,111 | | | | 177,995,141 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 586,921,562 | | | | 408,926,421 | |
| | | | | | | | |
End of period | | $ | 744,562,673 | | | $ | 586,921,562 | |
| | | | | | | | |
See notes to financial statements.
10
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Large Cap Growth Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Portfolio acquired the assets and liabilities of AB Growth Portfolio (the “Acquired Portfolio”) a reorganization that was effective at the close of business April 26, 2019 (the “Reorganization”). The Reorganization was approved by the Fund’s Board of Directors pursuant to a Plan of Acquisition and Liquidation (the “Reorganization Agreement”) (see Note J for additional information). The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. Factors considered in making this determination may include, but
11
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 generally values 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | |
Common Stocks(a) | | $ | 712,010,268 | | | $ | –0 | – | | $ | –0 | – | | $ | 712,010,268 | |
Short-Term Investments | | | 37,156,551 | | | | –0 | – | | | –0 | – | | | 37,156,551 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 749,166,819 | | | | –0 | – | | | –0 | – | | | 749,166,819 | |
Other Financial Instruments(b) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total | | $ | 749,166,819 | | | $ | –0 | – | | $ | –0 | – | | $ | 749,166,819 | |
| | | | | | | | | | | | | | | | |
| (a) | | See Portfolio of Investments for sector classifications. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
12
| | |
| |
| | | AB Variable Products Series Fund |
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, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 .60% of the first $2.5 billion, .50% of the next $2.5 billion and .45% 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, 2020, the reimbursement for such services amounted to $73,665.
13
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $35,925.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 49,147 | | | $ | 171,930 | | | $ | 183,920 | | | $ | 37,157 | | | $ | 178 | |
Government Money Market Portfolio* | | | 2,477 | | | | 313 | | | | 2,790 | | | | 0 | | | | 0 | ** |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 37,157 | | | $ | 178 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
| ** | | Amount is less than $500. |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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
14
| | |
| |
| | | AB Variable Products Series Fund |
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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 196,660,342 | | | $ | 221,245,177 | |
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 | | $ | 396,042,898 | |
| | | | |
Gross unrealized appreciation | | $ | 353,978,095 | |
Gross unrealized depreciation | | | (854,174 | ) |
| | | | |
Net unrealized appreciation | | $ | 353,123,921 | |
| | | | |
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, 2020.
2. Currency Transactions
The Portfolio may invest in non-U.S. Dollar-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to any
15
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Market Value
of Securities on Loan* | | Cash
Collateral* | | Market Value
of Non-Cash
Collateral* | | Income from
Borrowers | | Government Money Market Portfolio |
| | Income Earned | | Advisory Fee
Waived |
| | $ | 5,538,681 | | | | $ | 0 | | | | $ | 5,645,794 | | | | $ | 17,869 | | | | $ | 231 | | | | $ | 49 | |
| * | | As of December 31, 2020. |
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, 2020 | | | Year Ended
December 31, 2019 | | | | | | Year Ended
December 31, 2020 | | | Year Ended
December 31, 2019 | |
Class A | |
Shares sold | | | 641,498 | | | | 117,089 | | | | | | | $ | 43,850,540 | | | $ | 6,984,405 | |
Shares issued in reinvestment of distributions | | | 313,269 | | | | 544,009 | | | | | | | | 21,647,747 | | | | 30,469,955 | |
Shares issued in connection with the Reorganization | | | –0 | – | | | 574,265 | | | | | | | | –0 | – | | | 35,749,507 | |
Shares redeemed | | | (968,570 | ) | | | (611,474 | ) | | | | | | | (64,695,850 | ) | | | (36,020,088 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) | | | (13,803 | ) | | | 623,889 | | | | | | | $ | 802,437 | | | $ | 37,183,779 | |
| | | | | | | | | | | | | | | | | | | | |
Class B | |
Shares sold | | | 588,384 | | | | 349,243 | | | | | | | $ | 36,577,399 | | | $ | 19,217,888 | |
Shares issued in reinvestment of distributions | | | 447,960 | | | | 744,470 | | | | | | | | 28,746,560 | | | | 39,025,094 | |
Share issued in connection with the Reorganization | | | –0 | – | | | 739,816 | | | | | | | | –0 | – | | | 43,494,004 | |
Shares redeemed | | | (892,446 | ) | | | (658,326 | ) | | | | | | | (54,900,511 | ) | | | (36,313,480 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase | | | 143,898 | | | | 1,175,203 | | | | | | | $ | 10,423,448 | | | $ | 65,423,506 | |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 66% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
16
| | |
| |
| | | AB Variable Products Series Fund |
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as Portfolio’s growth approach, 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, or 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 more difficult to trade due to adverse market, economic, political, regulatory or other factors.
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 on the statement of assets and liabilities.
Industry/Sector Risk—Investments in a particular sector, industry or group of related industries may have more risk because market or economic factors affecting that sector or industry could have a significant effect on the value of the Portfolio’s investments.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 million revolving credit facility (the “Facility”) intended to provide short-term financing, if necessary, subject to certain restrictions in
17
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 2,813,054 | | | $ | 3,267,073 | |
Net long-term capital gains | | | 47,581,253 | | | | 66,227,976 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 50,394,307 | | | $ | 69,495,049 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 830,314 | |
Undistributed capital gains | | | 56,301,507 | |
Unrealized appreciation/(depreciation) | | | 353,123,921 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 410,255,742 | |
| | | | |
| (a) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings or additional paid-in capital.
NOTE J: Reorganization
At a meeting held on November 6-8, 2018, the Board of the Fund approved the acquisition of the assets and assumption of the liabilities of the Acquired Portfolio by the Portfolio, each a series of the Fund. The Portfolios have the same investment objective and similar investment strategies. The Reorganization was completed at the close of business April 26, 2019. Pursuant to the Reorganization, the assets and liabilities of the Acquired Portfolio shares were transferred in exchange for the shares of the same class of the Portfolio, in a tax-free exchange as follows:
| | | | | | | | | | | | | | | | |
| | | Shares
outstanding
before the
Reorganization | | | Shares
outstanding
immediately
after the
Reorganization | | | Aggregate
net assets
before the
Reorganization | | | Aggregate
net assets
immediately
after the
Reorganization | |
The Acquired Portfolio | | | 2,572,557 | | | | –0 | – | | $ | 79,243,511 | + | | $ | –0 | – |
The Portfolio | | | 7,930,514 | | | | 9,244,595 | | | $ | 478,400,346 | ++ | | $ | 557,643,857 | |
| + | | Includes accumulated net investment loss of $277,056, accumulated realized gain on investments of $1,407,147 and unrealized appreciation on investments of $25,722,398, with a fair value of $68,435,317 and identified cost of $42,712,919. |
| ++ | | Includes accumulated net investment loss of $150,739, accumulated realized gain on investments of $84,360,216 and unrealized appreciation on investments of $159,235,619, with a fair value of $478,656,041 and identified cost of $319,420,422. |
Assuming the acquisition of the Acquired Portfolio had been completed on January 1, 2019, the Portfolio’s pro forma results of operations for the year ended December 31, 2019, are as follows:
| | | | |
Net investment loss | | $ | (503,642 | ) |
Net realized and unrealized gain on investments | | | 174,866,664 | |
| | | | |
Net increase in net assets resulting from operations | | $ | 174,363,022 | |
| | | | |
18
| | |
| |
| | | AB Variable Products Series Fund |
Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Portfolio that have been included in the Portfolio’s Statement of Operations since April 26, 2019.
For financial reporting purposes, assets received and shares issued by the Portfolio were recorded at fair value; however, the cost basis of the investments received from the Acquired Portfolio was carried forward to align ongoing reporting of the Portfolio’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.
NOTE K: 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.
19
| | |
| | | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $61.26 | | | | $51.75 | | | | $56.34 | | | | $45.22 | | | | $49.50 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (loss) (a)(b) | | | (.06 | ) | | | .05 | | | | .02 | | | | .02 | | | | (.03 | )† |
Net realized and unrealized gain on investment transactions | | | 21.18 | | | | 17.18 | | | | 2.09 | | | | 14.10 | | | | 1.44 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 21.12 | | | | 17.23 | | | | 2.11 | | | | 14.12 | | | | 1.41 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (5.29 | ) | | | (7.72 | ) | | | (6.70 | ) | | | (3.00 | ) | | | (5.69 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $77.09 | | | | $61.26 | | | | $51.75 | | | | $56.34 | | | | $45.22 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 35.49 | % | | | 34.70 | % | | | 2.58 | % | | | 31.98 | % | | | 2.63 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $331,436 | | | | $264,234 | | | | $190,899 | | | | $208,392 | | | | $178,136 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)‡ | | | .66 | % | | | .67 | % | | | .68 | % | | | .70 | % | | | .85 | % |
Expenses, before waivers/reimbursements (e)‡ | | | .67 | % | | | .68 | % | | | .68 | % | | | .70 | % | | | .85 | % |
Net investment income (loss) (b) | | | (.08 | )% | | | .09 | % | | | .04 | % | | | .03 | % | | | (.07 | )%† |
Portfolio turnover rate | | | 33 | % | | | 38 | % | | | 46 | % | | | 48 | % | | | 59 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .01 | % | | | .01 | % | | | .00 | % | | | .00 | % | | | .00 | % |
See footnote summary on page 21.
20
| | |
| |
| | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $57.28 | | | | $48.91 | | | | $53.70 | | | | $43.32 | | | | $47.77 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment loss (a)(b) | | | (.21 | ) | | | (.09 | ) | | | (.12 | ) | | | (.11 | ) | | | (.14 | )† |
Net realized and unrealized gain on investment transactions | | | 19.73 | | | | 16.18 | | | | 2.03 | | | | 13.49 | | | | 1.38 | |
Contributions from Affiliates | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – | | | .00 | (c) |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 19.52 | | | | 16.09 | | | | 1.91 | | | | 13.38 | | | | 1.24 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (5.29 | ) | | | (7.72 | ) | | | (6.70 | ) | | | (3.00 | ) | | | (5.69 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $71.51 | | | | $57.28 | | | | $48.91 | | | | $53.70 | | | | $43.32 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (d)* | | | 35.15 | % | | | 34.37 | % | | | 2.32 | % | | | 31.67 | % | | | 2.36 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $413,127 | | | | $322,688 | | | | $218,027 | | | | $220,934 | | | | $202,903 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (e)‡ | | | .91 | % | | | .92 | % | | | .93 | % | | | .95 | % | | | 1.10 | % |
Expenses, before waivers/reimbursements (e)‡ | | | .92 | % | | | .93 | % | | | .93 | % | | | .95 | % | | | 1.10 | % |
Net investment loss (b) | | | (.33 | )% | | | (.16 | )% | | | (.21 | )% | | | (.21 | )% | | | (.32 | )%† |
Portfolio turnover rate | | | 33 | % | | | 38 | % | | | 46 | % | | | 48 | % | | | 59 | % |
| | | | | | | | | | | | | | | | | | | | |
‡ Expense ratios exclude the estimated acquired fund fees of the affiliated/unaffiliated underlying | |
portfolios | | | .01 | % | | | .01 | % | | | .00 | % | | | .00 | % | | | .00 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Amount is less than $.005. |
| (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. |
| (e) | | In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the years ended December 31, 2020 and December 31, 2019, such waiver amounted to .01% and .01%, respectively. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total Return |
| $.005 | | .01% | | .01% |
| * | | 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, 2019, December 31, 2017, and December 31, 2016 by .04%, .03% and .01%, respectively. |
See notes to financial statements.
21
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Large Cap Growth Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Large Cap Growth Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
22
| | |
| | |
| | |
| |
| 2020 TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 100% of dividends paid qualify for the dividends received deduction. The Portfolio designates $47,581,253 of dividends paid as long-term capital gain dividends.
23
| | |
| | |
| | |
| |
| LARGE CAP GROWTH PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
|
|
|
| | |
| | |
| OFFICERS | | |
Frank V. Caruso(2), Vice President John H. Fogarty(2), Vice President Vinay Thapar(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 (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. Large Cap Growth Investment Team. Messrs. Caruso, Fogarty and Thapar are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
24
| | |
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| MANAGEMENT OF THE FUND | | AB 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 AND
(YEAR FIRST ELECTED)** | | PRINCIPAL OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith,#
1345 Avenue of the Americas New York, NY 10105
60 (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. | | | 74 | | | None |
| | | | | | | | |
| INDEPENDENT DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,##
Chairman of the Board
79
(2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership, and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
25
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | |
NAME, ADDRESS*,
AGE AND
(YEAR FIRST ELECTED)** | | PRINCIPAL OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) | | | | | | | |
| | | | | | | | | |
Jorge A. Bermudez,##
69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | | 74 | | | Moody’s Corporation since April 2011 |
| | | | | | | | | |
Michael J. Downey,##
77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | | 74 | | | None |
| | | | | | | | | |
Nancy P. Jacklin,##
72
(2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | | 74 | | | None |
| | | | | | | | | |
26
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | | |
NAME, ADDRESS*,
AGE AND
(YEAR FIRST ELECTED)** | | PRINCIPAL OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) | | | | | | | |
| | | | | | | | | |
Jeanette W. Loeb,##
68
(2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | | |
Carol C. McMullen,##
65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | | 74 | | | None |
| | | | | | | | | |
Garry L. Moody,##
68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | | 74 | | | None |
| | | | | | | | | |
27
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | | |
NAME, ADDRESS*,
AGE AND
(YEAR FIRST ELECTED)** | | PRINCIPAL OCCUPATION(S), DURING PAST FIVE YEARS AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR |
INDEPENDENT DIRECTORS (continued) | | | | | | | |
| | | | | | | | | |
Earl D. Weiner,##
81
(2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
28
| | |
| |
| | | AB 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^ 60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Frank V. Caruso 64 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of US Growth Equities. |
| | | | |
John H. Fogarty 51 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Vinay Thapar 42 | | Vice President | | Senior Vice President of the Adviser**, with which he was associated since prior to 2016. |
| | | | |
Emilie D. Wrapp 65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes 44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo 61 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke 60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto 56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| | | | |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
29
| | |
| | |
| | |
| |
| LARGE CAP GROWTH PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
30
| | |
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Large Cap Growth Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
31
| | |
| LARGE CAP GROWTH PORTFOLIO | | |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with those for two other funds advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the
32
| | |
| |
| | | AB Variable Products Series Fund |
Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
33
VPS-LCG-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS SERIES FUND, INC.
| + | | SMALL CAP GROWTH PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| SMALL CAP GROWTH PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Small Cap Growth Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
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 US 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 US equity market capitalization (excluding, for purposes of this calculation, companies with market capitalizations of less than $10 million). 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 funds (“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.
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 2000 Growth Index, for the one-, five- and 10-year periods ended December 31, 2020.
All share classes of the Portfolio outperformed the benchmark for the annual period. Security selection drove outperformance, relative to the benchmark, led by selection within the technology and health-care sectors. Selection within real estate and consumer discretionary detracted marginally. Sector selection was also positive, as underweights to real estate and consumer discretionary contributed to returns and offset losses from an overweight to financials and an underweight to health care. The Fund’s repositioning in response to increased market volatility was a significant contributor to the Fund’s turnover rate of 103%.
The Portfolio did not utilize derivatives during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio continues to be built from the bottom up, with an emphasis on companies that can deliver fundamental outperformance. The Portfolio remains overweight in secular growth companies that have unique drivers or company-specific initiatives to support their future earnings growth, regardless of the macro backdrop. At the end of the reporting period, technology reflected the Portfolio’s largest overweight, with health care the largest underweight.
1
| | |
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The Russell 2000® Growth Index is unmanaged and 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 small-cap growth companies within the US. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, 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- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade due to adverse market, economic, political, regulatory or other factors.
Derivatives Risk: Derivatives may be difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
Industry/Sector Risk: Investments in a particular sector, industry or group of related industries may have more risk because market or economic factors affecting that sector or 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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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
| | |
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARK | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Small Cap Growth Portfolio Class A | | | 53.98% | | | | 24.34% | | | | 17.57% | |
| | | |
| Small Cap Growth Portfolio Class B | | | 53.64% | | | | 24.04% | | | | 17.27% | |
| | | |
| Russell 2000 Growth Index | | | 34.63% | | | | 16.36% | | | | 13.48% | |
1 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 1.16% and 1.42% 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 exclusive of expenses associated with acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Portfolio may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs to 0.90% and 1.15% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Small Cap Growth Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmark. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on page 2.
3
| | |
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,386.70 | | | $ | 5.40 | | | | 0.90 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.61 | | | $ | 4.57 | | | | 0.90 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,384.30 | | | $ | 6.89 | | | | 1.15 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.36 | | | $ | 5.84 | | | | 1.15 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
4
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Plug Power, Inc. | | $ | 2,230,329 | | | | 1.9 | % |
Trupanion, Inc. | | | 1,953,547 | | | | 1.6 | |
II-VI, Inc. | | | 1,921,788 | | | | 1.6 | |
SiteOne Landscape Supply, Inc. | | | 1,919,106 | | | | 1.6 | |
Lattice Semiconductor Corp. | | | 1,908,678 | | | | 1.6 | |
LHC Group, Inc. | | | 1,883,616 | | | | 1.6 | |
Freshpet, Inc. | | | 1,820,454 | | | | 1.5 | |
Tetra Tech, Inc. | | | 1,781,275 | | | | 1.5 | |
Silicon Laboratories, Inc. | | | 1,780,722 | | | | 1.5 | |
MACOM Technology Solutions Holdings, Inc. | | | 1,773,389 | | | | 1.5 | |
| | | | | | | | | |
| | | $ | 18,972,904 | | | | 15.9 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Health Care | | $ | 33,367,549 | | | | 27.9 | % |
Information Technology | | | 30,846,395 | | | | 25.8 | |
Industrials | | | 20,170,604 | | | | 16.8 | |
Consumer Discretionary | | | 16,475,055 | | | | 14.1 | |
Financials | | | 9,777,050 | | | | 7.8 | |
Consumer Staples | | | 3,493,819 | | | | 2.9 | |
Materials | | | 1,775,095 | | | | 1.5 | |
Real Estate | | | 1,354,182 | | | | 1.1 | |
Communication Services | | | 460,279 | | | | 0.4 | |
Short-Term Investments | | | 2,072,013 | | | | 1.7 | |
| | | | | | | | | |
Total Investments | | $ | 119,792,041 | | | | 100.0 | % |
| 2 | | 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
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | |
COMMON STOCKS–98.8% | | | | | | | | |
| | | | | | | | |
HEALTH CARE–28.0% | | | | | | | | |
BIOTECHNOLOGY–15.6% | | | | | | | | |
ADC Therapeutics SA(a)(b) | | | 14,916 | | | $ | 477,461 | |
Allakos, Inc.(a)(b) | | | 7,048 | | | | 986,720 | |
Allogene Therapeutics, Inc.(b) | | | 21,461 | | | | 541,676 | |
Annexon, Inc.(b) | | | 17,385 | | | | 435,147 | |
Arena Pharmaceuticals, Inc.(b) | | | 6,933 | | | | 532,662 | |
Ascendis Pharma A/S (Sponsored ADR)(b) | | | 3,751 | | | | 625,592 | |
Beyondspring, Inc.(b) | | | 34,232 | | | | 417,630 | |
Biohaven Pharmaceutical Holding Co., Ltd.(b) | | | 10,046 | | | | 861,043 | |
Bioxcel Therapeutics, Inc.(b) | | | 10,442 | | | | 482,420 | |
Blueprint Medicines Corp.(b) | | | 10,797 | | | | 1,210,884 | |
Coherus Biosciences, Inc.(a)(b) | | | 38,980 | | | | 677,472 | |
Deciphera Pharmaceuticals, Inc.(b) | | | 12,520 | | | | 714,516 | |
Insmed, Inc.(b) | | | 25,896 | | | | 862,078 | |
Iovance Biotherapeutics, Inc.(a)(b) | | | 9,994 | | | | 463,722 | |
iTeos Therapeutics, Inc.(b) | | | 17,525 | | | | 592,695 | |
Legend Biotech Corp. ADR(b) | | | 10,218 | | | | 287,739 | |
Madrigal Pharmaceuticals, Inc.(a)(b) | | | 2,789 | | | | 310,053 | |
Praxis Precision Medicines, Inc.(b) | | | 11,164 | | | | 614,243 | |
PTC Therapeutics, Inc.(b) | | | 14,720 | | | | 898,362 | |
Relay Therapeutics, Inc.(b) | | | 11,378 | | | | 472,870 | |
Turning Point Therapeutics, Inc.–Class I(b) | | | 7,817 | | | | 952,501 | |
Twist Bioscience Corp.(b) | | | 12,370 | | | | 1,747,757 | |
Ultragenyx Pharmaceutical, Inc.(a)(b) | | | 10,053 | | | | 1,391,637 | |
Vir Biotechnology, Inc.(a)(b) | | | 24,582 | | | | 658,306 | |
Y-mAbs Therapeutics, Inc.(b) | | | 14,955 | | | | 740,422 | |
Zentalis Pharmaceuticals, Inc.(a)(b) | | | 12,136 | | | | 630,344 | |
| | | | | | | | |
| | | | | | | 18,585,952 | |
| | | | | | | | |
HEALTH CARE EQUIPMENT & SUPPLIES–4.4% | | | | | | | | |
Eargo, Inc.(b) | | | 14,645 | | | | 656,389 | |
iRhythm Technologies, Inc.(b) | | | 7,328 | | | | 1,738,275 | |
Outset Medical, Inc.(b) | | | 14,461 | | | | 821,963 | |
Selectquote, Inc.(a)(b) | | | 42,905 | | | | 890,279 | |
Silk Road Medical, Inc.(b) | | | 18,132 | | | | 1,141,953 | |
| | | | | | | | |
| | | | | | | 5,248,859 | |
| | | | | | | | |
HEALTH CARE PROVIDERS & SERVICES–2.9% | | | | | | | | |
Allovir, Inc.(b) | | | 15,630 | | | | 600,817 | |
Guardant Health, Inc.(b) | | | 7,823 | | | | 1,008,228 | |
LHC Group, Inc.(b) | | | 8,830 | | | | 1,883,616 | |
| | | | | | | | |
| | | | | | | 3,492,661 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | |
| | | | | | | | |
HEALTH CARE TECHNOLOGY–1.5% | | | | | | | | |
American Well Corp.–Class A(b) | | | 25,561 | | | $ | 647,460 | |
Health Catalyst, Inc.(b) | | | 25,482 | | | | 1,109,232 | |
| | | | | | | | |
| | | | | | | 1,756,692 | |
| | | | | | | | |
LIFE SCIENCES TOOLS & SERVICES–2.0% | | | | | | | | |
ICON PLC(b) | | | 5,672 | | | | 1,105,926 | |
Repligen Corp.(b) | | | 6,460 | | | | 1,237,930 | |
| | | | | | | | |
| | | | | | | 2,343,856 | |
| | | | | | | | |
PHARMACEUTICALS–1.6% | | | | | | | | |
Axsome Therapeutics, Inc.(a)(b) | | | 8,630 | | | | 703,086 | |
Certara, Inc.(b) | | | 15,518 | | | | 523,267 | |
Revance Therapeutics, Inc.(b) | | | 25,165 | | | | 713,176 | |
| | | | | | | | |
| | | | | | | 1,939,529 | |
| | | | | | | | |
| | | | | | | 33,367,549 | |
| | | | | | | | |
INFORMATION TECHNOLOGY–25.9% | | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–4.4% | | | | | | | | |
Allegro MicroSystems, Inc.(b) | | | 16,851 | | | | 449,248 | |
II-VI, Inc.(a)(b) | | | 25,300 | | | | 1,921,788 | |
Littelfuse, Inc. | | | 5,710 | | | | 1,454,109 | |
Novanta, Inc.(b) | | | 11,720 | | | | 1,385,538 | |
| | | | | | | | |
| | | | | | | 5,210,683 | |
| | | | | | | | |
IT SERVICES–1.9% | | | | | | | | |
BigCommerce Holdings, Inc.(a)(b) | | | 12,589 | | | | 807,584 | |
Shift4 Payments, Inc. Class A(b) | | | 18,953 | | | | 1,429,056 | |
| | | | | | | | |
| | | | | | | 2,236,640 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–8.8% | | | | | | | | |
Ambarella, Inc.(b) | | | 12,230 | | | | 1,122,959 | |
Cree, Inc.(a)(b) | | | 10,251 | | | | 1,085,581 | |
Lattice Semiconductor Corp.(b) | | | 41,656 | | | | 1,908,678 | |
MACOM Technology Solutions Holdings, Inc.(a)(b) | | | 32,220 | | | | 1,773,389 | |
MKS Instruments, Inc. | | | 9,060 | | | | 1,363,077 | |
Semtech Corp.(b) | | | 21,060 | | | | 1,518,215 | |
Silicon Laboratories, Inc.(b) | | | 13,984 | | | | 1,780,722 | |
| | | | | | | | |
| | | | | | | 10,552,621 | |
| | | | | | | | |
SOFTWARE–10.8% | | | | | | | | |
Anaplan, Inc.(b) | | | 15,859 | | | | 1,139,469 | |
Blackline, Inc.(b) | | | 13,150 | | | | 1,753,947 | |
C3.ai, Inc.(b) | | | 5,229 | | | | 725,524 | |
Duck Creek Technologies, Inc.(b) | | | 25,955 | | | | 1,123,852 | |
Everbridge, Inc.(b) | | | 6,370 | | | | 949,576 | |
Five9, Inc.(a)(b) | | | 5,113 | | | | 891,707 | |
Manhattan Associates, Inc.(b) | | | 13,450 | | | | 1,414,671 | |
6
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | |
Q2 Holdings, Inc.(b) | | | 10,820 | | | $ | 1,369,055 | |
Rapid7, Inc.(b) | | | 19,470 | | | | 1,755,415 | |
Smartsheet, Inc.–Class A(b) | | | 15,118 | | | | 1,047,526 | |
Varonis Systems, Inc.(b) | | | 4,130 | | | | 675,709 | |
| | | | | | | | |
| | | | | | | 12,846,451 | |
| | | | | | | | |
| | | | | | | 30,846,395 | |
| | | | | | | | |
INDUSTRIALS–16.9% | | | | | | | | |
AEROSPACE & DEFENSE–1.6% | | | | | | | | |
Axon Enterprise, Inc.(b) | | | 9,245 | | | | 1,132,790 | |
Mercury Systems, Inc.(b) | | | 8,370 | | | | 737,062 | |
| | | | | | | | |
| | | | | | | 1,869,852 | |
| | | | | | | | |
BUILDING PRODUCTS–2.7% | | | | | | | | |
AZEK Co., Inc. (The)(b) | | | 26,609 | | | | 1,023,116 | |
Simpson Manufacturing Co., Inc. | | | 14,580 | | | | 1,362,501 | |
Trex Co., Inc.(b) | | | 9,700 | | | | 812,084 | |
| | | | | | | | |
| | | | | | | 3,197,701 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–2.1% | | | | | | | | |
Hydrofarm Holdings Group, Inc.(b) | | | 15,252 | | | | 801,950 | |
Tetra Tech, Inc. | | | 15,385 | | | | 1,781,275 | |
| | | | | | | | |
| | | | | | | 2,583,225 | |
| | | | | | | | |
ELECTRICAL EQUIPMENT–2.7% | | | | | | | | |
Array Technologies, Inc.(b) | | | 22,423 | | | | 967,328 | |
Plug Power, Inc.(b) | | | 65,772 | | | | 2,230,329 | |
| | | | | | | | |
| | | | | | | 3,197,657 | |
| | | | | | | | |
MACHINERY–4.8% | | | | | | | | |
Chart Industries, Inc.(b) | | | 12,408 | | | | 1,461,538 | |
ITT, Inc. | | | 18,130 | | | | 1,396,373 | |
John Bean Technologies Corp. | | | 14,000 | | | | 1,594,180 | |
Middleby Corp. (The)(b) | | | 10,170 | | | | 1,311,116 | |
| | | | | | | | |
| | | | | | | 5,763,207 | |
| | | | | | | | |
ROAD & RAIL–1.4% | | | | | | | | |
Saia, Inc.(b) | | | 9,070 | | | | 1,639,856 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–1.6% | | | | | | | | |
SiteOne Landscape Supply, Inc.(b) | | | 12,098 | | | | 1,919,106 | |
| | | | | | | | |
| | | | | | | 20,170,604 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–13.8% | | | | | | | | |
AUTO COMPONENTS–1.5% | | | | | | | | |
Fox Factory Holding Corp.(b) | | | 16,491 | | | | 1,743,264 | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–1.2% | | | | | | | | |
Chegg, Inc.(b) | | | 13,660 | | | | 1,233,908 | |
Strategic Education, Inc. | | | 1,680 | | | | 160,154 | |
| | | | | | | | |
| | | | | | | 1,394,062 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | |
HOTELS, RESTAURANTS & LEISURE–3.2% | | | | | | | | |
Planet Fitness, Inc.(b) | | | 13,494 | | | $ | 1,047,539 | |
Texas Roadhouse, Inc.–Class A | | | 21,340 | | | | 1,667,935 | |
Wingstop, Inc. | | | 8,666 | | | | 1,148,678 | |
| | | | | | | | |
| | | | | | | 3,864,152 | |
| | | | | | | | |
HOUSEHOLD DURABLES–2.3% | | | | | | | | |
Installed Building Products, Inc.(b) | | | 10,610 | | | | 1,081,477 | |
Lovesac Co. (The)(b) | | | 23,080 | | | | 994,517 | |
Meritage Homes Corp.(b) | | | 8,220 | | | | 680,781 | |
| | | | | | | | |
| | | | | | | 2,756,775 | |
| | | | | | | | |
INTERNET & DIRECT MARKETING RETAIL–0.8% | | | | | | | | |
RealReal, Inc. (The)(b) | | | 51,385 | | | | 1,004,063 | |
| | | | | | | | |
MULTILINE RETAIL–0.0% | | | | | | | | |
Ollie’s Bargain Outlet Holdings, Inc.(a)(b) | | | 690 | | | | 56,421 | |
| | | | | | | | |
SPECIALTY RETAIL–4.8% | | | | | | | | |
Five Below, Inc.(b) | | | 6,102 | | | | 1,067,728 | |
Floor & Decor Holdings, Inc.–Class A(b) | | | 14,580 | | | | 1,353,753 | |
Lithia Motors, Inc.–Class A | | | 5,378 | | | | 1,573,979 | |
Sleep Number Corp.(b) | | | 20,289 | | | | 1,660,858 | |
| | | | | | | | |
| | | | | | | 5,656,318 | |
| | | | | | | | |
| | | | | | | 16,475,055 | |
| | | | | | | | |
FINANCIALS–8.2% | | | | | | | | |
BANKS–0.9% | | | | | | | | |
First Financial Bankshares, Inc. | | | 30,400 | | | | 1,099,720 | |
| | | | | | | | |
CAPITAL MARKETS–3.2% | | | | | | | | |
Hamilton Lane, Inc.–Class A | | | 14,407 | | | | 1,124,466 | |
Houlihan Lokey, Inc. | | | 18,660 | | | | 1,254,512 | |
Stifel Financial Corp. | | | 28,425 | | | | 1,434,326 | |
| | | | | | | | |
| | | | | | | 3,813,304 | |
| | | | | | | | |
CONSUMER FINANCE–0.4% | | | | | | | | |
Fisker, Inc.(b) | | | 5,530 | | | | 81,015 | |
Fisker, Inc. (PIPE)(b)(c) | | | 29,970 | | | | 439,060 | |
| | | | | | | | |
| | | | | | | 520,075 | |
| | | | | | | | |
INSURANCE–3.7% | | | | | | | | |
Inari Medical, Inc.(b) | | | 12,396 | | | | 1,082,047 | |
Palomar Holdings, Inc.(b) | | | 9,836 | | | | 873,830 | |
Trean Insurance Group, Inc.(b) | | | 33,170 | | | | 434,527 | |
Trupanion, Inc.(b) | | | 16,319 | | | | 1,953,547 | |
| | | | | | | | |
| | | | | | | 4,343,951 | |
| | | | | | | | |
| | | | | | | 9,777,050 | |
| | | | | | | | |
CONSUMER STAPLES–2.9% | | | | | | | | |
FOOD & STAPLES RETAILING–0.8% | | | | | | | | |
Grocery Outlet Holding Corp.(b) | | | 24,843 | | | | 975,088 | |
| | | | | | | | |
7
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | |
FOOD PRODUCTS–2.1% | | | | | | | | |
Freshpet, Inc.(b) | | | 12,821 | | | $ | 1,820,454 | |
Vital Farms, Inc.(b) | | | 27,589 | | | | 698,277 | |
| | | | | | | | |
| | | | | | | 2,518,731 | |
| | | | | | | | |
| | | | | | | 3,493,819 | |
| | | | | | | | |
MATERIALS–1.5% | | | | | | | | |
CHEMICALS–0.7% | | | | | | | | |
Element Solutions, Inc. | | | 45,190 | | | | 801,219 | |
| | | | | | | | |
CONTAINERS & PACKAGING–0.8% | | | | | | | | |
Ranpak Holdings Corp.(b) | | | 72,461 | | | | 973,876 | |
| | | | | | | | |
| | | | | | | 1,775,095 | |
| | | | | | | | |
REAL ESTATE–1.2% | | | | | | | | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)–1.2% | | | | | | | | |
QTS Realty Trust, Inc.–Class A(a) | | | 21,884 | | | | 1,354,182 | |
| | | | | | | | |
COMMUNICATION SERVICES–0.4% | | | | | | | | |
ENTERTAINMENT–0.4% | | | | | | | | |
Rush Street Interactive,
Inc.(a)(b) | | | 21,260 | | | | 460,279 | |
| | | | | | | | |
Total Common Stocks
(cost $76,562,715) | | | | | | | 117,720,028 | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–1.8% | | | | | | | | |
INVESTMENT COMPANIES–1.8% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(c)(d)(e)
(cost $2,072,013) | | | 2,072,013 | | | | 2,072,013 | |
| | | | | | | | |
TOTAL INVESTMENTS BEFORE SECURITY LENDING COLLATERAL FOR SECURITIES LOANED–100.6%
(cost $78,634,728) | | | | | | | 119,792,041 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | |
INVESTMENTS OF CASH COLLATERAL FOR SECURITIES LOANED–1.1% | | | | | | | | |
INVESTMENT COMPANIES–1.1% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(d)(e)(f)
(cost $1,351,408) | | | 1,351,408 | | | $ | 1,351,408 | |
| | | | | | | | |
TOTAL INVESTMENTS–101.7%
(cost $79,986,136) | | | | | | | 121,143,449 | |
Other assets less liabilities–(1.7)% | | | | | | | (2,013,538 | ) |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 119,129,911 | |
| | | | | | | | |
| (a) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (b) | | Non-income producing security. |
| (c) | | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security is considered restricted, but liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2020, the market value of this security amounted to $439,060 or 0.4% of net assets. |
| (d) | | Affiliated investments. |
| (e) | | The rate shown represents the 7-day yield as of period end. |
| (f) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Glossary:
ADR—American Depositary Receipt
PIPE—Private Investment in Public Equity
REIT—Real Estate Investment Trust
See notes to financial statements.
8
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $76,562,715) | | $ | 117,720,028 | (a) |
Affiliated issuers (cost $3,423,421—including investment of cash collateral for securities loaned of $1,351,408) | | | 3,423,421 | |
Cash | | | 39,717 | |
Receivable for investment securities sold | | | 589,763 | |
Receivable for capital stock sold | | | 64,330 | |
Unaffiliated dividends receivable | | | 21,979 | |
Affiliated dividends receivable | | | 55 | |
| | | | |
Total assets | | | 121,859,293 | |
| | | | |
LIABILITIES | | | | |
Payable for collateral received on securities loaned | | | 1,351,408 | |
Payable for investment securities purchased | | | 940,942 | |
Payable for capital stock redeemed | | | 268,839 | |
Advisory fee payable | | | 64,408 | |
Administrative fee payable | | | 20,266 | |
Distribution fee payable | | | 17,790 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses | | | 65,583 | |
| | | | |
Total liabilities | | | 2,729,382 | |
| | | | |
NET ASSETS | | $ | 119,129,911 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 4,537 | |
Additional paid-in capital | | | 59,715,195 | |
Distributable earnings | | | 59,410,179 | |
| | | | |
| | $ | 119,129,911 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 34,314,244 | | | | 1,193,146 | | | $ | 28.76 | |
| | | |
| B | | $ | 84,815,667 | | | | 3,344,161 | | | $ | 25.36 | |
| (a) | | Includes securities on loan with a value of $10,600,482 (see Note E). |
See notes to financial statements.
9
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
INVESTMENT INCOME | | | | |
Dividends | | | | |
Unaffiliated issuers | | $ | 205,762 | |
Affiliated issuers | | | 7,902 | |
Securities lending income | | | 52,394 | |
| | | | |
| | | 266,058 | |
| | | | |
EXPENSES | | | | |
Advisory fee (see Note B) | | | 659,129 | |
Distribution fee—Class B | | | 150,616 | |
Transfer agency—Class A | | | 1,364 | |
Transfer agency—Class B | | | 2,893 | |
Custody and accounting | | | 106,465 | |
Administrative | | | 75,346 | |
Audit and tax | | | 41,107 | |
Printing | | | 22,033 | |
Legal | | | 21,814 | |
Directors’ fees | | | 17,317 | |
Miscellaneous | | | 1,318 | |
| | | | |
Total expenses | | | 1,099,402 | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (160,113 | ) |
| | | | |
Net expenses | | | 939,289 | |
| | | | |
Net investment loss | | | (673,231 | ) |
| | | | |
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS | | | | |
Net realized gain on investment transactions | | | 20,283,029 | |
Net change in unrealized appreciation/depreciation of investments | | | 23,109,959 | |
| | | | |
Net gain on investment transactions | | | 43,392,988 | |
| | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | $ | 42,719,757 | |
| | | | |
See notes to financial statements.
10
| | |
| | | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | | | | | | | | |
Net investment loss | | $ | (673,231 | ) | | $ | (410,369 | ) |
Net realized gain on investment transactions | | | 20,283,029 | | | | 6,852,640 | |
Net change in unrealized appreciation/depreciation of investments | | | 23,109,959 | | | | 15,506,078 | |
Contributions from Affiliates (see Note B) | | | –0 | – | | | 25 | |
| | | | | | | | |
Net increase in net assets from operations | | | 42,719,757 | | | | 21,948,374 | |
Distributions to Shareholders | | | | | | | | |
Class A | | | (1,828,600 | ) | | | (3,355,272 | ) |
Class B | | | (5,259,631 | ) | | | (6,551,394 | ) |
CAPITAL STOCK TRANSACTIONS | | | | | | | | |
Net increase | | | 5,353,821 | | | | 3,282,769 | |
| | | | | | | | |
Total increase | | | 40,985,347 | | | | 15,324,477 | |
NET ASSETS | | | | | | | | |
Beginning of period | | | 78,144,564 | | | | 62,820,087 | |
| | | | | | | | |
End of period | | $ | 119,129,911 | | | $ | 78,144,564 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A : Significant Accounting Policies
The AB Small Cap Growth Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Fund offers 11 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 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
12
| | |
| |
| | | AB 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 as deemed appropriate by the Adviser. 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 generally values 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | |
Common Stocks(a) | | $ | 117,720,028 | | | $ | –0 | – | | $ | –0 | – | | $ | 117,720,028 | |
Short-Term Investments | | | 2,072,013 | | | | –0 | – | | | –0 | – | | | 2,072,013 | |
Investments of Cash Collateral for Securities Loaned in Affiliated Money Market Fund | | | 1,351,408 | | | | –0 | – | | | –0 | – | | | 1,351,408 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 121,143,449 | | | | –0 | – | | | –0 | – | | | 121,143,449 | |
Other Financial Instruments(b) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total | | $ | 121,143,449 | | | $ | –0 | – | | $ | –0 | – | | $ | 121,143,449 | |
| | | | | | | | | | | | | | | | |
| (a) | | See Portfolio of Investments for sector classifications. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
13
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 (excluding expenses associated with acquired fund fees and expenses other than the advisory fees of any AB mutual funds in which the Portfolio may invest, interest expense, taxes, extraordinary expenses, and brokerage commissions and other transaction costs) on an annual basis (the “Expense Caps”) to .90% and 1.15% of daily average net assets for Class A and Class B shares, respectively. For the year ended December 31, 2020, such
14
| | |
| |
| | | AB Variable Products Series Fund |
reimbursements/waivers amounted to $157,695. This fee waiver and/or expense reimbursement agreement extends through May 1, 2021 and then may be extended by the Adviser for additional one-year terms.
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, 2020, the reimbursement for such services amounted to $75,346.
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 $1,636 for the year ended December 31, 2020.
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $1,883.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 1,604 | | | $ | 45,634 | | | $ | 45,166 | | | $ | 2,072 | | | $ | 8 | |
Government Money Market Portfolio* | | | 3,070 | | | | 30,724 | | | | 32,443 | | | | 1,351 | | | | 5 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 3,423 | | | $ | 13 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
During the year ended December 31, 2019, the Adviser reimbursed the Portfolio $25 for trading losses incurred due to a trade entry error.
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the ���Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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
15
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB 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, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 89,551,610 | | | $ | 91,803,488 | |
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 | | $ | 81,569,520 | |
| | | | |
Gross unrealized appreciation | | $ | 41,957,419 | |
Gross unrealized depreciation | | | (2,383,490 | ) |
| | | | |
Net unrealized appreciation | | $ | 39,573,929 | |
| | | | |
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, 2020.
2. Currency Transactions
The Portfolio may invest in non-U.S. Dollar-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the
16
| | |
| |
| | | AB Variable Products Series Fund |
borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value of
Securities on Loan* | | | Cash Collateral* | | | Market Value of
Non-Cash
Collateral* | | | Income from
Borrowers | | | Government Money Market
Portfolio | |
| | Income
Earned | | | Advisory Fee
Waived | |
| $ | 10,600,482 | | | $ | 1,351,408 | | | $ | 9,603,942 | | | $ | 47,246 | | | $ | 5,148 | | | $ | 535 | |
| *As | | of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | |
Shares sold | | | 90,208 | | | | 77,029 | | | | | | | $ | 1,939,754 | | | $ | 1,529,231 | |
Shares issued in reinvestment of distributions | | | 79,956 | | | | 174,572 | | | | | | | | 1,828,600 | | | | 3,355,272 | |
Shares redeemed | | | (341,056 | ) | | | (258,486 | ) | | | | | | | (7,601,528 | ) | | | (5,081,587 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net decrease | | | (170,892 | ) | | | (6,885 | ) | | | | | | $ | (3,833,174 | ) | | $ | (197,084 | ) |
| | | | | | | | | | | | | | | | | | | | |
Class B | |
Shares sold | | | 1,421,448 | | | | 770,488 | | | | | | | $ | 28,063,230 | | | $ | 13,546,465 | |
Shares issued in reinvestment of distributions | | | 260,507 | | | | 382,005 | | | | | | | | 5,259,631 | | | | 6,551,394 | |
Shares redeemed | | | (1,209,065 | ) | | | (949,627 | ) | | | | | | | (24,135,866 | ) | | | (16,618,006 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase | | | 472,890 | | | | 202,866 | | | | | | | $ | 9,186,995 | | | $ | 3,479,853 | |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 78% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
17
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
NOTE G : Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s growth approach, 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- and mid-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 more difficult to trade due to adverse market, economic, political, regulatory or other factors.
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 on the statement of assets and liabilities.
Industry/Sector Risk—Investments in a particular sector, industry or group of related industries may have more risk because market or economic factors affecting that sector or industry could have a significant effect on the value of the Portfolio’s investments.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
18
| | |
| |
| | | AB 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 $325 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, 2020.
NOTE I : Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Net long-term capital gains | | $ | 7,088,231 | | | $ | 9,906,666 | |
| | | | | | | | |
Total taxable distributions paid | | $ | 7,088,231 | | | $ | 9,906,666 | |
| | | | | | | | |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 2,673,240 | |
Undistributed capital gains | | | 17,157,435 | |
Unrealized appreciation/(depreciation) | | | 39,579,504 | (a) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 59,410,179 | |
| | | | |
| (a) | | The differences between book-basis and tax-basis unrealized appreciation/(depreciation) are attributable primarily to the tax treatment of passive foreign investment companies (PFICs) and the tax deferral of losses on wash sales. |
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio did not have any capital loss carryforwards.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings 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.
19
| | |
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $19.92 | | | | $16.58 | | | | $17.53 | | | | $13.07 | | | | $17.31 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment loss (a)(b) | | | (.13 | ) | | | (.08 | ) | | | (.13 | ) | | | (.18 | ) | | | (.12 | )† |
Net realized and unrealized gain on investment transactions | | | 10.49 | | | | 6.02 | | | | .14 | (c) | | | 4.64 | | | | 1.05 | |
Contributions from Affiliates | | | –0 | – | | | .00 | (d) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase in net asset value from operations | | | 10.36 | | | | 5.94 | | | | .01 | | | | 4.46 | | | | .93 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (1.52 | ) | | | (2.60 | ) | | | (.96 | ) | | | –0 | – | | | (5.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $28.76 | | | | $19.92 | | | | $16.58 | | | | $17.53 | | | | $13.07 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (e)* | | | 53.98 | % | | | 36.40 | % | | | (.89 | )% | | | 34.12 | % | | | 6.46 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $34,314 | | | | $27,167 | | | | $22,724 | | | | $26,039 | | | | $22,405 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (f) | | | .90 | % | | | .90 | % | | | 1.06 | % | | | 1.38 | % | | | 1.48 | % |
Expenses, before waivers/reimbursements (f) | | | 1.09 | % | | | 1.16 | % | | | 1.15 | % | | | 1.38 | % | | | 1.49 | % |
Net investment loss (b) | | | (.60 | )% | | | (.39 | )% | | | (.65 | )% | | | (1.19 | )% | | | (.83 | )%† |
Portfolio turnover rate | | | 103 | % | | | 69 | % | | | 73 | % | | | 69 | % | | | 60 | % |
See footnote summary on page 21.
20
| | |
| |
| | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $17.75 | | | | $15.03 | | | | $16.00 | | | | $11.96 | | | | $16.30 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment loss (a)(b) | | | (.16 | ) | | | (.11 | ) | | | (.16 | ) | | | (.20 | ) | | | (.15 | )† |
Net realized and unrealized gain on investment transactions | | | 9.29 | | | | 5.43 | | | | .15 | (c) | | | 4.24 | | | | .98 | |
Contributions from Affiliates | | | –0 | – | | | .00 | (d) | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | 9.13 | | | | 5.32 | | | | (.01 | ) | | | 4.04 | | | | .83 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Distributions | | | | | | | | | | | | | | | | | | | | |
Distributions from net realized gain on investment transactions | | | (1.52 | ) | | | (2.60 | ) | | | (.96 | ) | | | 0 | | | | (5.17 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $25.36 | | | | $17.75 | | | | $15.03 | | | | $16.00 | | | | $11.96 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (e)* | | | 53.64 | % | | | 36.01 | % | | | (1.11 | )% | | | 33.78 | % | | | 6.22 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $84,816 | | | | $50,978 | | | | $40,096 | | | | $23,396 | | | | $15,094 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements (f) | | | 1.15 | % | | | 1.15 | % | | | 1.30 | % | | | 1.61 | % | | | 1.73 | % |
Expenses, before waivers/reimbursements (f) | | | 1.33 | % | | | 1.42 | % | | | 1.40 | % | | | 1.62 | % | | | 1.74 | % |
Net investment loss (b) | | | (.84 | )% | | | (.64 | )% | | | (.88 | )% | | | (1.42 | )% | | | (1.08 | )%† |
Portfolio turnover rate | | | 103 | % | | | 69 | % | | | 73 | % | | | 69 | % | | | 60 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (c) | | Due to timing of sales and repurchase of capital shares, the net realized and unrealized gain (loss) per share is not in accordance with the Portfolio’s change in net realized and unrealized gain (loss) on investment transactions for the period. |
| (d) | | Amount is less than $.005. |
| (e) | | 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. |
| (f) | | In connection with the Portfolio’s investments in affiliated underlying portfolios, the Portfolio incurs no direct expenses, but bears proportionate shares of the fees and expenses (i.e., operating, administrative and investment advisory fees) of the affiliated underlying portfolios. The Adviser has contractually agreed to waive its fees from the Portfolio in an amount equal to the Portfolio’s pro rata share of certain acquired fund fees and expenses, and for the years ended December 31, 2018 and December 31, 2017, such waiver amounted to .01% and .01%, respectively. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total Return |
| $.004 | | .03% | | .03% |
| * | | 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, 2018, December 31, 2017 and December 31, 2016 by .05%, .03% and .08%, respectively. |
See notes to financial statements.
21
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Small Cap Growth Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Small Cap Growth Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
22
| | |
| | |
| | |
| |
| 2020 FEDERAL TAX INFORMATION (unaudited) | | AB 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, 2020. The Portfolio designates $7,088,231 of dividends paid as long-term capital gain dividends.
23
| | |
| | |
| | |
| |
| SMALL CAP GROWTH PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
Bruce K. Aronow(2), Vice President Esteban Gomez(2), Vice President Samantha S. Lau(2), Vice President Heather Pavlak(2), Vice President Wen-Tse Tseng(2), Vice President | | Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst 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 (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. Messrs. Aronow, Gomez and Tseng, and Mses. Lau and Pavlak are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
24
| | |
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| MANAGEMENT OF THE FUND | | AB 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 INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY HELD
BY DIRECTOR |
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith,# 1345 Avenue of the Americas New York, NY 10105 60 (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. | | | 74 | | | None |
| | | | | | | | |
| DISINTERESTED DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,## Chairman of the Board 79 (2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
25
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY HELD
BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Jorge A. Bermudez,## 69 (2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation
since April 2011 |
| | | | | | | | |
Michael J. Downey,## 77 (2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,## 72 (2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008-2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
26
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY HELD
BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Jeanette W. Loeb,## 68 (2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen,## 65 (2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010-2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody,## 68 (2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees of the AB Funds since 2008. | | | 74 | | | None |
27
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE,
(YEAR FIRST ELECTED**) | | PRINCIPAL
OCCUPATION(S)
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY HELD
BY DIRECTOR |
DISINTERESTED DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner,## 81 (2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal & Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
28
| | |
| |
| | | AB 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^ 60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
Bruce K. Aronow 54 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of Small and SMID Cap Growth Equities. |
| | | | |
Esteban Gomez 37 | | Vice President | | Vice President of the Adviser**, with which he has been associated since 2016. Before joining the Adviser in 2016, he spent three years at J.P. Morgan as an equity research analyst on the Broadlines Retailing, Apparel/Footwear & Specialty Equity Research Team. |
| | | | |
Samantha S. Lau 48 | | Vice President | | Senior Vice President of the Adviser**, with which she has been associated since prior to 2016. She is also Co-Chief Investment Officer of US Small/SMID Cap Growth Equities. |
| | | | |
Heather Pavlak 36 | | Vice President | | Vice President of the Adviser**, with which she has been associated since 2018. Before joining the Adviser in 2018, she spent four years at Schroders Investment Management, where she covered materials, utilities and transports as an equity research analyst. |
| | | | |
Wen-Tse Tseng 55 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Emilie D. Wrapp 65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI**, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes 44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo 61 | | Treasurer and Chief
Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke 60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto 56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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. abfunds.com, for a free prospectus or SAI. |
29
| | |
| | |
| | |
| |
| SMALL CAP GROWTH PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
30
| | |
| | | |
| SMALL CAP GROWTH PORTFOLIO | | |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Small Cap Growth Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
31
| | |
| SMALL CAP GROWTH PORTFOLIO | | |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with those for two other funds advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the
32
| | |
| |
| | | AB Variable Products Series Fund |
Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
The directors noted that the Fund 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, and that the Adviser had provided, and they had received, information about the expense ratios of the relevant ETFs. The directors concluded, based on the Adviser’s explanation of how it uses ETFs when they are the most cost-effective way to obtain desired exposures, in some cases pending purchases of underlying securities, that the advisory fee for the Fund would be for services in addition to, rather than duplicative of, the services provided under the advisory contracts of the ETFs.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year and the directors considered the Adviser’s expense cap for the Fund. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
33
VPS-SCG-0151-1220
DEC 12.31.20
ANNUAL REPORT
AB VARIABLE PRODUCTS
SERIES FUND, INC.
| + | | SMALL/MID CAP VALUE PORTFOLIO |
Beginning on May 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, you may not be receiving paper copies of the Portfolio’s shareholder reports from the insurance company that offers your contract unless you specifically request paper copies from the insurance company or from your financial intermediary. Instead of delivering paper copies of the reports, the insurance company may choose to make the reports available on a website, and will notify you by mail each time a report is posted and provide you with a website link to access the report. Instructions for requesting paper copies will be provided by your insurance company.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the insurance company or your financial intermediary electronically by following the instructions provided by the insurance company or by contacting your financial intermediary.
You may elect to receive all future reports in paper free of charge from the insurance company. You can inform the insurance company or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by following the instructions provided by the insurance company or by contacting your financial intermediary. Your election to receive reports in paper will apply to all portfolio companies available under your contract with the insurance company.
Investment Products Offered
| | • | | 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.abfunds.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 as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT reports are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-PORT 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 registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
| | |
| | |
| | |
| |
| SMALL/MID CAP VALUE PORTFOLIO | | AB Variable Products Series Fund |
LETTER TO INVESTORS
February 12, 2021
The following is an update of AB Variable Products Series Fund—Small/Mid Cap Value Portfolio (the “Portfolio”) for the annual reporting period ended December 31, 2020.
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 US 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 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 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 (“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-US 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 primary benchmark, the Russell 2500 Value Index, as well as the Russell 2500 Index, which represents small-/mid-cap stocks, for the one-, five- and 10-year periods ended December 31, 2020.
All share classes of the Portfolio underperformed the primary benchmark and the Russell 2500 Index for the annual period. Stock selection in the energy and materials sectors detracted most, relative to the benchmark, while selection in real estate and health care contributed. Overall sector selection contributed to performance. Overweights to technology and consumer discretionary contributed, while underweights to health care and communication services detracted.
The Portfolio did not utilize derivatives during the annual period.
MARKET REVIEW AND INVESTMENT STRATEGY
Global equities recorded positive returns for the annual period ended December 31, 2020, erasing losses from lows reached in late March when the COVID-19 pandemic triggered a sharp decline. During the early stages of the recovery, global economies rebounded from record GDP contractions, supported by extensive monetary and fiscal stimulus, expedited vaccine development, and improving economic data. Favorable news about the efficacy of coronavirus vaccination candidates helped offset market volatility prompted by an inability to control the spread of the virus in many countries, a potentially contested US presidential election and lack of additional US fiscal stimulus. At the end of the period—despite surging infection rates and the emergence of a seemingly more transmissible strain of the virus—optimism over the start of vaccine distribution, clarity following the US elections, and passage of both a US relief package and a post-Brexit trade deal fueled a broad-based rally. For the annual period, large-cap stocks, led by US technology companies, narrowly outperformed small-cap stocks, while growth stocks outperformed value stocks significantly in both the large- and small-cap categories.
The Portfolio’s Senior Investment Management Team (the “Team”) seeks to invest opportunistically in what it believes are undervalued companies with solid fundamentals, without sacrificing the Portfolio’s deep-value discipline. The Team remains focused on attractively valued opportunities, which the Team believes are widespread across most industry sectors and regions. 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
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| |
| DISCLOSURES AND RISKS | | AB Variable Products Series Fund |
Benchmark Disclosure
The Russell 2500® Value Index and the Russell 2500™ Index are unmanaged and do not reflect fees and expenses associated with the active management of a mutual fund portfolio. The Russell 2500 Value Index represents the performance of small- to mid-cap value companies within the US. The Russell 2500 Index represents the performance of 2,500 small- to mid-cap cap companies within the US. 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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s value approach, 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- and mid-capitalization companies may have additional risks because these companies have limited product lines, markets or financial resources.
Foreign (Non-US) Risk: Investments in securities of non-US issuers may involve more risk than those of US issuers. These securities may fluctuate more widely in price and may be more difficult to trade 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 difficult to price or unwind and leveraged so that small changes may produce disproportionate losses for the Portfolio. Derivatives, especially over-the-counter derivatives, are also subject to counterparty risk.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
These risks are fully discussed in the Variable Products prospectus. As with all investments, you may lose money by investing in the Portfolio.
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 in this report 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) 227 4618. 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
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| |
| HISTORICAL PERFORMANCE | | AB Variable Products Series Fund |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| THE PORTFOLIO VS. ITS BENCHMARKS | | Net Asset Value Returns | |
| PERIODS ENDED DECEMBER 31, 2020 (unaudited) | | 1 Year | | | 5 Years1 | | | 10 Years1 | |
| | | |
| Small/Mid Cap Value Portfolio Class A | | | 3.37% | | | | 8.35% | | | | 8.75% | |
| | | |
| Small/Mid Cap Value Portfolio Class B | | | 3.05% | | | | 8.07% | | | | 8.48% | |
| | | |
| Primary Benchmark: Russell 2500 Value Index | | | 4.88% | | | | 9.43% | | | | 9.33% | |
| | | |
| Russell 2500 Index | | | 19.99% | | | | 13.64% | | | | 11.97% | |
1 Average annual returns. | | | | | | | | | | | | |
| | | | | | | | | | | | |
The Portfolio’s current prospectus fee table shows the Portfolio’s total annual operating expense ratios as 0.83% and 1.08% for Class A and Class B shares, respectively. Contractual fee waivers and/or expense reimbursements limit the Portfolio’s annual operating expense ratios to 0.82% and 1.07% for Class A and Class B shares, respectively. These waivers/reimbursements may not be terminated before May 1, 2021, 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.
GROWTH OF A $10,000 INVESTMENT
12/31/2010 to 12/31/2020 (unaudited)
This chart illustrates the total value of an assumed $10,000 investment in Small/Mid Cap Value Portfolio Class A shares (from 12/31/2010 to 12/31/2020) as compared to the performance of the Portfolio’s benchmarks. The chart assumes the reinvestment of dividends and capital gains distributions.
See Disclosures, Risks and Note About Historical Performance on page 2.
3
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO |
| |
| EXPENSE EXAMPLE (unaudited) | | AB Variable Products Series Fund |
As a shareholder of the Portfolio, 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 Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 Portfolio’s actual expense ratio and an assumed annual rate of return of 5% before expenses, which is not the Portfolio’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 Portfolio 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, 2020 | | | Ending
Account Value
December 31, 2020 | | | Expenses Paid
During Period* | | | Annualized
Expense Ratio* | |
Class A | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,347.40 | | | $ | 4.90 | | | | 0.83 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,020.96 | | | $ | 4.22 | | | | 0.83 | % |
| | | | | | | | | | | | | | | | |
Class B | | | | | | | | | | | | | | | | |
Actual | | $ | 1,000 | | | $ | 1,345.70 | | | $ | 6.37 | | | | 1.08 | % |
Hypothetical (5% annual return before expenses) | | $ | 1,000 | | | $ | 1,019.71 | | | $ | 5.48 | | | | 1.08 | % |
| * | | Expenses are equal to each classes’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
4
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| TEN LARGEST HOLDINGS1 | | |
| |
| December 31, 2020 (unaudited) | | AB Variable Products Series Fund |
| | | | | | | | |
| COMPANY | | U.S. $ VALUE | | | PERCENT OF NET ASSETS | |
Regal Beloit Corp. | | $ | 11,348,258 | | | | 1.7 | % |
XPO Logistics, Inc. | | | 10,371,592 | | | | 1.6 | |
Oshkosh Corp. | | | 10,263,847 | | | | 1.6 | |
First Citizens BancShares, Inc./NC—Class A | | | 9,986,555 | | | | 1.5 | |
Change Healthcare, Inc. | | | 9,678,231 | | | | 1.5 | |
AECOM | | | 9,240,164 | | | | 1.4 | |
Knight-Swift Transportation Holdings, Inc. | | | 9,211,315 | | | | 1.4 | |
Reliance Steel & Aluminum Co. | | | 9,106,508 | | | | 1.4 | |
Ralph Lauren Corp. | | | 8,899,855 | | | | 1.4 | |
BankUnited, Inc. | | | 8,743,553 | | | | 1.3 | |
| | | | | | | | | |
| | | $ | 96,849,878 | | | | 14.8 | % |
SECTOR BREAKDOWN2
December 31, 2020 (unaudited)
| | | | | | | | |
| SECTOR | | U.S. $ VALUE | | | PERCENT OF TOTAL INVESTMENTS | |
Financials | | $ | 148,285,954 | | | | 22.6 | % |
Industrials | | | 130,046,744 | | | | 19.9 | |
Consumer Discretionary | | | 117,957,729 | | | | 18.0 | |
Information Technology | | | 58,618,173 | | | | 9.0 | |
Materials | | | 56,322,681 | | | | 8.6 | |
Real Estate | | | 53,821,227 | | | | 8.2 | |
Consumer Staples | | | 23,023,110 | | | | 3.5 | |
Health Care | | | 19,709,431 | | | | 3.0 | |
Energy | | | 18,054,882 | | | | 2.8 | |
Utilities | | | 13,283,388 | | | | 2.0 | |
Communication Services | | | 5,143,476 | | | | 0.8 | |
Short-Term Investments | | | 10,258,061 | | | | 1.6 | |
| | | | | | | | | |
Total Investments | | $ | 654,524,856 | | | | 100.0 | % |
| 2 | | 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
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
COMMON STOCKS–98.3% | |
| | | | | | | | |
FINANCIALS–22.6% | |
BANKS–11.2% | |
Associated Banc-Corp. | | | 255,403 | | | $ | 4,354,622 | |
Comerica, Inc. | | | 141,880 | | | | 7,925,417 | |
First Citizens BancShares, Inc./NC–Class A | | | 17,390 | | | | 9,986,555 | |
Sterling Bancorp/DE | | | 455,590 | | | | 8,191,508 | |
Synovus Financial Corp. | | | 268,782 | | | | 8,700,473 | |
Texas Capital Bancshares, Inc.(a) | | | 133,282 | | | | 7,930,279 | |
Umpqua Holdings Corp. | | | 389,010 | | | | 5,889,611 | |
Webster Financial Corp. | | | 190,992 | | | | 8,050,312 | |
Wintrust Financial Corp. | | | 90,950 | | | | 5,556,136 | |
Zions Bancorp NA | | | 151,488 | | | | 6,580,639 | |
| | | | | | | | |
| | | | | | | 73,165,552 | |
| | | | | | | | |
CAPITAL MARKETS–2.5% | |
Moelis & Co. | | | 180,583 | | | | 8,444,061 | |
Stifel Financial Corp. | | | 151,797 | | | | 7,659,677 | |
| | | | | | | | |
| | | | | | | 16,103,738 | |
| | | | | | | | |
CONSUMER FINANCE–0.8% | |
OneMain Holdings, Inc. | | | 116,486 | | | | 5,609,966 | |
| | | | | | | | |
DIVERSIFIED FINANCIAL SERVICES–1.1% | | | | | | | | |
Voya Financial, Inc.(b) | | | 120,748 | | | | 7,101,190 | |
| | | | | | | | |
INSURANCE–5.0% | |
American Financial Group, Inc./OH | | | 73,290 | | | | 6,421,670 | |
Everest Re Group Ltd. | | | 34,383 | | | | 8,048,716 | |
Hanover Insurance Group, Inc. (The) | | | 58,490 | | | | 6,838,651 | |
Reinsurance Group of America, Inc.–Class A | | | 56,917 | | | | 6,596,681 | |
Selective Insurance Group, Inc. | | | 76,185 | | | | 5,102,871 | |
| | | | | | | | |
| | | | | | | 33,008,589 | |
| | | | | | | | |
THRIFTS & MORTGAGE FINANCE–2.0% | | | | | | | | |
BankUnited, Inc. | | | 251,396 | | | | 8,743,553 | |
Essent Group Ltd. | | | 105,402 | | | | 4,553,366 | |
| | | | | | | | |
| | | | | | | 13,296,919 | |
| | | | | | | | |
| | | | | | | 148,285,954 | |
| | | | | | | | |
INDUSTRIALS–19.9% | |
AEROSPACE &
DEFENSE–1.0% | | | | | | | | |
AAR Corp. | | | 177,297 | | | | 6,421,698 | |
| | | | | | | | |
AIR FREIGHT & LOGISTICS–1.6% | | | | | | | | |
XPO Logistics, Inc.(a) | | | 87,010 | | | | 10,371,592 | |
| | | | | | | | |
AIRLINES–2.0% | |
Alaska Air Group, Inc. | | | 114,092 | | | | 5,932,784 | |
SkyWest, Inc. | | | 174,254 | | | | 7,024,179 | |
| | | | | | | | |
| | | | | | | 12,956,963 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
BUILDING PRODUCTS–0.9% | |
Masonite International Corp.(a) | | | 57,679 | | | $ | 5,672,153 | |
| | | | | | | | |
COMMERCIAL SERVICES & SUPPLIES–1.0% | | | | | | | | |
Herman Miller, Inc. | | | 203,980 | | | | 6,894,524 | |
| | | | | | | | |
CONSTRUCTION &
ENGINEERING–1.4% | | | | | | | | |
AECOM(a) | | | 185,620 | | | | 9,240,164 | |
| | | | | | | | |
ELECTRICAL
EQUIPMENT–2.2% | |
EnerSys | | | 38,297 | | | | 3,180,949 | |
Regal Beloit Corp. | | | 92,405 | | | | 11,348,258 | |
| | | | | | | | |
| | | | | | | 14,529,207 | |
| | | | | | | | |
MACHINERY–4.0% | |
Crane Co. | | | 34,450 | | | | 2,675,387 | |
Kennametal, Inc.(b) | | | 232,300 | | | | 8,418,552 | |
Middleby Corp. (The)(a) | | | 24,027 | | | | 3,097,561 | |
Oshkosh Corp. | | | 119,250 | | | | 10,263,847 | |
Welbilt, Inc.(a) | | | 129,060 | | | | 1,703,592 | |
| | | | | | | | |
| | | | | | | 26,158,939 | |
| | | | | | | | |
PROFESSIONAL
SERVICES–1.3% | |
Robert Half International, Inc. | | | 135,655 | | | | 8,475,724 | |
| | | | | | | | |
ROAD & RAIL–1.4% | |
Knight-Swift Transportation Holdings, Inc. | | | 220,261 | | | | 9,211,315 | |
| | | | | | | | |
TRADING COMPANIES & DISTRIBUTORS–3.1% | | | | | | | | |
GATX Corp.(b) | | | 100,790 | | | | 8,383,712 | |
MRC Global, Inc.(a) | | | 703,188 | | | | 4,662,136 | |
United Rentals, Inc.(a)(b) | | | 30,480 | | | | 7,068,617 | |
| | | | | | | | |
| | | | | | | 20,114,465 | |
| | | | | | | | |
| | | | | | | 130,046,744 | |
| | | | | | | | |
CONSUMER DISCRETIONARY–18.0% | | | | | | | | |
AUTO COMPONENTS–3.3% | | | | | | | | |
Cooper Tire & Rubber Co. | | | 128,063 | | | | 5,186,551 | |
Dana, Inc. | | | 430,228 | | | | 8,398,051 | |
Lear Corp. | | | 49,931 | | | | 7,940,527 | |
| | | | | | | | |
| | | | | | | 21,525,129 | |
| | | | | | | | |
DIVERSIFIED CONSUMER SERVICES–1.2% | | | | | | | | |
Hillenbrand, Inc. | | | 167,295 | | | | 6,658,341 | |
Houghton Mifflin Harcourt Co.(a) | | | 436,915 | | | | 1,454,927 | |
| | | | | | | | |
| | | | | | | 8,113,268 | |
| | | | | | | | |
HOTELS, RESTAURANTS & LEISURE–1.6% | | | | | | | | |
Hilton Grand Vacations, Inc.(a) | | | 205,640 | | | | 6,446,814 | |
Papa John’s International, Inc. | | | 50,982 | | | | 4,325,823 | |
| | | | | | | | |
| | | | | | | 10,772,637 | |
| | | | | | | | |
6
| | |
| | |
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
HOUSEHOLD
DURABLES–2.9% | | | | | | | | |
KB Home | | | 176,660 | | | $ | 5,921,643 | |
PulteGroup, Inc. | | | 184,210 | | | | 7,943,135 | |
Taylor Morrison Home Corp.–Class A(a) | | | 188,709 | | | | 4,840,386 | |
| | | | | | | | |
| | | | | | | 18,705,164 | |
| | | | | | | | |
LEISURE PRODUCTS–1.0% | | | | | | | | |
Brunswick Corp./DE | | | 87,956 | | | | 6,705,765 | |
| | | | | | | | |
SPECIALTY RETAIL–2.9% | |
Foot Locker, Inc.(b) | | | 198,735 | | | | 8,036,843 | |
Gap, Inc. (The) | | | 283,608 | | | | 5,726,046 | |
Williams-Sonoma, Inc.(b) | | | 49,964 | | | | 5,088,334 | |
| | | | | | | | |
| | | | | | | 18,851,223 | |
| | | | | | | | |
TEXTILES, APPAREL & LUXURY GOODS–5.1% | | | | | | | | |
Kontoor Brands, Inc.(a)(b) | | | 165,260 | | | | 6,702,946 | |
Ralph Lauren Corp. | | | 85,790 | | | | 8,899,855 | |
Skechers U.S.A., Inc.–Class A(a) | | | 130,975 | | | | 4,707,241 | |
Steven Madden Ltd. | | | 201,910 | | | | 7,131,461 | |
Tapestry, Inc. | | | 188,000 | | | | 5,843,040 | |
| | | | | | | | |
| | | | | | | 33,284,543 | |
| | | | | | | | |
| | | | | | | 117,957,729 | |
| | | | | | | | |
INFORMATION TECHNOLOGY– 8.9% | | | | | | | | |
COMMUNICATIONS EQUIPMENT–0.5% | | | | | | | | |
NetScout Systems, Inc.(a) | | | 126,869 | | | | 3,478,748 | |
| | | | | | | | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS–2.8% | | | | | | | | |
Arrow Electronics, Inc.(a) | | | 63,530 | | | | 6,181,469 | |
Belden, Inc. | | | 150,694 | | | | 6,314,079 | |
Vishay Intertechnology, Inc. | | | 281,790 | | | | 5,835,871 | |
| | | | | | | | |
| | | | | | | 18,331,419 | |
| | | | | | | | |
IT SERVICES–1.6% | |
Amdocs Ltd. | | | 73,726 | | | | 5,229,385 | |
Genpact Ltd. | | | 123,141 | | | | 5,093,112 | |
| | | | | | | | |
| | | | | | | 10,322,497 | |
| | | | | | | | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT–1.7% | | | | | | | | |
Kulicke & Soffa Industries, Inc. | | | 194,698 | | | | 6,193,343 | |
MaxLinear, Inc.–Class A(a) | | | 123,695 | | | | 4,723,912 | |
| | | | | | | | |
| | | | | | | 10,917,255 | |
| | | | | | | | |
SOFTWARE–1.1% | |
CommVault Systems, Inc.(a) | | | 134,606 | | | | 7,453,134 | |
| | | | | | | | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS–1.2% | | | | | | | | |
NCR Corp.(a) | | | 216,000 | | | | 8,115,120 | |
| | | | | | | | |
| | | | | | | 58,618,173 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
MATERIALS–8.6% | |
CHEMICALS–4.2% | | | | | | | | |
GCP Applied Technologies, Inc.(a) | | | 150,035 | | | $ | 3,548,328 | |
Innospec, Inc. | | | 34,716 | | | | 3,149,782 | |
Orion Engineered Carbons SA | | | 381,805 | | | | 6,544,138 | |
Trinseo SA | | | 157,366 | | | | 8,058,713 | |
Westlake Chemical Corp. | | | 71,208 | | | | 5,810,573 | |
| | | | | | | | |
| | | | | | | 27,111,534 | |
| | | | | | | | |
CONTAINERS & PACKAGING–2.3% | | | | | | | | |
Graphic Packaging Holding Co. | | | 459,221 | | | | 7,779,204 | |
Sealed Air Corp. | | | 162,797 | | | | 7,454,474 | |
| | | | | | | | |
| | | | | | | 15,233,678 | |
| | | | | | | | |
METALS & MINING–2.1% | | | | | | | | |
Carpenter Technology Corp. | | | 167,272 | | | | 4,870,961 | |
Reliance Steel & Aluminum Co. | | | 76,046 | | | | 9,106,508 | |
| | | | | | | | |
| | | | | | | 13,977,469 | |
| | | | | | | | |
| | | | | | | 56,322,681 | |
| | | | | | | | |
REAL ESTATE–8.2% | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITS)–8.2% | | | | | | | | |
American Campus Communities, Inc. | | | 150,945 | | | | 6,455,918 | |
Camden Property Trust | | | 78,803 | | | | 7,873,996 | |
Cousins Properties, Inc. | | | 169,390 | | | | 5,674,565 | |
CubeSmart | | | 214,712 | | | | 7,216,470 | |
MGM Growth Properties LLC–Class A | | | 245,972 | | | | 7,698,923 | |
Physicians Realty Trust | | | 379,681 | | | | 6,758,322 | |
RLJ Lodging Trust | | | 372,831 | | | | 5,275,559 | |
STAG Industrial, Inc. | | | 219,268 | | | | 6,867,474 | |
| | | | | | | | |
| | | | | | | 53,821,227 | |
| | | | | | | | |
CONSUMER STAPLES–3.5% | |
BEVERAGES–0.6% | | | | | | | | |
Primo Water Corp. | | | 265,840 | | | | 4,168,371 | |
| | | | | | | | |
FOOD & STAPLES RETAILING–0.8% | | | | | | | | |
US Foods Holding Corp.(a) | | | 147,897 | | | | 4,926,449 | |
| | | | | | | | |
FOOD PRODUCTS–2.1% | |
Hain Celestial Group, Inc. (The)(a)(b) | | | 210,274 | | | | 8,442,501 | |
Nomad Foods Ltd.(a) | | | 215,806 | | | | 5,485,789 | |
| | | | | | | | |
| | | | | | | 13,928,290 | |
| | | | | | | | |
| | | | | | | 23,023,110 | |
| | | | | | | | |
HEALTH CARE–3.0% | |
HEALTH CARE PROVIDERS & SERVICES–1.5% | | | | | | | | |
MEDNAX, Inc.(a) | | | 281,300 | | | | 6,903,102 | |
Molina Healthcare, Inc.(a) | | | 14,708 | | | | 3,128,098 | |
| | | | | | | | |
| | | | | | | 10,031,200 | |
| | | | | | | | |
7
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| PORTFOLIO OF INVESTMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
HEALTH CARE TECHNOLOGY–1.5% | | | | | | | | |
Change Healthcare, Inc.(a) | | | 518,940 | | | $ | 9,678,231 | |
| | | | | | | | |
| | | | | | | 19,709,431 | |
| | | | | | | | |
ENERGY–2.8% | |
ENERGY EQUIPMENT & SERVICES–0.8% | | | | | | | | |
Dril-Quip, Inc.(a) | | | 167,670 | | | | 4,966,385 | |
| | | | | | | | |
OIL, GAS & CONSUMABLE FUELS–2.0% | | | | | | | | |
Cimarex Energy Co. | | | 128,099 | | | | 4,804,994 | |
HollyFrontier Corp. | | | 320,445 | | | | 8,283,503 | |
| | | | | | | | |
| | | | | | | 13,088,497 | |
| | | | | | | | |
| | | | | | | 18,054,882 | |
| | | | | | | | |
UTILITIES–2.0% | | | | | | | | |
ELECTRIC UTILITIES–1.2% | | | | | | | | |
IDACORP, Inc. | | | 69,174 | | | | 6,642,779 | |
PNM Resources, Inc. | | | 30,169 | | | | 1,464,102 | |
| | | | | | | | |
| | | | | | | 8,106,881 | |
| | | | | | | | |
GAS UTILITIES–0.8% | |
Southwest Gas Holdings, Inc. | | | 85,210 | | | | 5,176,507 | |
| | | | | | | | |
| | | | | | | 13,283,388 | |
| | | | | | | | |
COMMUNICATION SERVICES–0.8% | | | | | | | | |
MEDIA–0.8% | | | | | | | | |
Criteo SA (Sponsored ADR)(a) | | | 250,779 | | | | 5,143,476 | |
| | | | | | | | |
Total Common Stocks
(cost $513,142,381) | | | | | | | 644,266,795 | |
| | | | | | | | |
| | | | | | | | |
Company | | Shares | | | U.S. $ Value | |
| | | | | | | | |
SHORT-TERM INVESTMENTS–1.6% | | | | | | | | |
INVESTMENT
COMPANIES–1.6% | | | | | | | | |
AB Fixed Income Shares, Inc.–Government Money Market Portfolio–Class AB,
0.03%(c)(d)(e)
(cost $10,258,061) | | | 10,258,061 | | | $ | 10,258,061 | |
| | | | | | | | |
TOTAL INVESTMENTS–99.9%
(cost $523,400,442) | | | | | | | 654,524,856 | |
Other assets less
liabilities–0.1% | | | | | | | 635,514 | |
| | | | | | | | |
NET ASSETS–100.0% | | | | | | $ | 655,160,370 | |
| | | | | | | | |
| (a) | | Non-income producing security. |
| (b) | | Represents entire or partial securities out on loan. See Note E for securities lending information. |
| (c) | | Affiliated investments. |
| (d) | | The rate shown represents the 7-day yield as of period end. |
| (e) | | To obtain a copy of the fund’s shareholder report, please go to the Securities and Exchange Commission’s website at www.sec.gov, or call AB at (800) 227-4618. |
Glossary:
ADR—American Depositary Receipt
REIT—Real Estate Investment Trust
See notes to financial statements.
8
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| STATEMENT OF ASSETS & LIABILITIES | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
| | | | |
ASSETS | | | | |
Investments in securities, at value | | | | |
Unaffiliated issuers (cost $513,142,381) | | $ | 644,266,795 | (a) |
Affiliated issuers (cost $10,258,061) | | | 10,258,061 | |
Receivable for investment securities sold | | | 1,923,036 | |
Unaffiliated dividends receivable | | | 717,531 | |
Receivable for capital stock sold | | | 101,684 | |
Affiliated dividends receivable | | | 156 | |
| | | | |
Total assets | | | 657,267,263 | |
| | | | |
LIABILITIES | | | | |
Payable for investment securities purchased | | | 1,170,781 | |
Advisory fee payable | | | 416,707 | |
Payable for capital stock redeemed | | | 286,818 | |
Distribution fee payable | | | 92,004 | |
Administrative fee payable | | | 20,476 | |
Transfer Agent fee payable | | | 146 | |
Accrued expenses | | | 119,961 | |
| | | | |
Total liabilities | | | 2,106,893 | |
| | | | |
NET ASSETS | | $ | 655,160,370 | |
| | | | |
COMPOSITION OF NET ASSETS | | | | |
Capital stock, at par | | $ | 37,954 | |
Additional paid-in capital | | | 542,161,059 | |
Distributable earnings | | | 112,961,357 | |
| | | | |
| | $ | 655,160,370 | |
| | | | |
Net Asset Value Per Share—1 billion shares of capital stock authorized, $.001 par value
| | | | | | | | | | | | |
| Class | | Net Assets | | | Shares
Outstanding | | | Net Asset
Value | |
| | | |
| A | | $ | 222,441,081 | | | | 12,788,489 | | | $ | 17.39 | |
| | | |
| B | | $ | 432,719,289 | | | | 25,165,712 | | | $ | 17.19 | |
| (a) | | Includes securities on loan with a value of $47,728,040 (see Note E). |
See notes to financial statements.
9
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| STATEMENT OF OPERATIONS | | |
| |
| Year Ended December 31, 2020 | | AB Variable Products Series Fund |
| | | | | | | | |
INVESTMENT INCOME | | | | | | | | |
Dividends | | | | | | | | |
Unaffiliated issuers (net of foreign taxes withheld of $49,059) | | $ | 10,808,451 | | | | | |
Affiliated issuers | | | 40,461 | | | | | |
Securities lending income | | | 60,989 | | | $ | 10,909,901 | |
| | | | | | | | |
EXPENSES | | | | | | | | |
Advisory fee (see Note B) | | | 4,092,869 | | | | | |
Distribution fee—Class B | | | 913,366 | | | | | |
Transfer agency—Class A | | | 2,040 | | | | | |
Transfer agency—Class B | | | 4,111 | | | | | |
Custody and accounting | | | 132,647 | | | | | |
Printing | | | 97,006 | | | | | |
Administrative | | | 73,980 | | | | | |
Audit and tax | | | 51,053 | | | | | |
Legal | | | 50,731 | | | | | |
Directors’ fees | | | 24,148 | | | | | |
Miscellaneous | | | 23,120 | | | | | |
| | | | | | | | |
Total expenses | | | 5,465,071 | | | | | |
Less: expenses waived and reimbursed by the Adviser (see Notes B & E) | | | (9,637 | ) | | | | |
| | | | | | | | |
Net expenses | | | | | | | 5,455,434 | |
| | | | | | | | |
Net investment income | | | | | | | 5,454,467 | |
| | | | | | | | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS | | | | | | | | |
Net realized loss on investment transactions | | | | | | | (22,104,001 | ) |
Net change in unrealized appreciation/depreciation of investments | | | | | | | 52,509,733 | |
| | | | | | | | |
Net gain on investment transactions | | | | | | | 30,405,732 | |
| | | | | | | | |
NET INCREASE IN NET ASSETS FROM OPERATIONS | | | | | | $ | 35,860,199 | |
| | | | | | | | |
See notes to financial statements.
10
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| |
| STATEMENT OF CHANGES IN NET ASSETS | | AB Variable Products Series Fund |
| | | | | | | | |
| | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | |
Net investment income | | $ | 5,454,467 | | | $ | 4,553,941 | |
Net realized gain (loss) on investment transactions | | | (22,104,001 | ) | | | 27,134,530 | |
Net change in unrealized appreciation/depreciation of investments | | | 52,509,733 | | | | 79,052,203 | |
| | | | | | | | |
Net increase in net assets from operations | | | 35,860,199 | | | | 110,740,674 | |
Distributions to Shareholders | |
Class A | | | (10,812,568 | ) | | | (23,904,178 | ) |
Class B | | | (21,414,765 | ) | | | (47,150,231 | ) |
CAPITAL STOCK TRANSACTIONS | |
Net increase | | | 17,235,925 | | | | 31,612,650 | |
| | | | | | | | |
Total increase | | | 20,868,791 | | | | 71,298,915 | |
NET ASSETS | |
Beginning of period | | | 634,291,579 | | | | 562,992,664 | |
| | | | | | | | |
End of period | | $ | 655,160,370 | | | $ | 634,291,579 | |
| | | | | | | | |
See notes to financial statements.
11
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| December 31, 2020 | | AB Variable Products Series Fund |
NOTE A: Significant Accounting Policies
The AB Small/Mid Cap Value Portfolio (the “Portfolio”) is a series of AB 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 as an open-end series investment company. The Fund offers 11 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 Portfolio is an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. 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 is commonly used for 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. In instances when amortized cost is utilized, the Valuation Committee (the “Committee”) must reasonably conclude that the utilization of amortized cost is approximately the same as the fair value of the security. Such factors the Committee will consider include, but are not limited to, an impairment of the creditworthiness of the issuer or material changes in interest rates. 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. Open-end mutual funds are valued at the closing net asset value per share, while exchange traded funds are valued at the closing market price per share.
Securities for which market quotations are not readily available (including restricted securities) or are deemed unreliable are valued at fair value as deemed appropriate by the Adviser. 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
12
| | |
| | |
| | |
| |
| | | AB Variable Products Series Fund |
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 generally values 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, 2020:
| | | | | | | | | | | | | | | | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Investments in Securities: | | | | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Common Stocks(a) | | $ | 644,266,795 | | | $ | –0 | – | | $ | –0 | – | | $ | 644,266,795 | |
Short-Term Investments | | | 10,258,061 | | | | –0 | – | | | –0 | – | | | 10,258,061 | |
| | | | | | | | | | | | | | | | |
Total Investments in Securities | | | 654,524,856 | | | | –0 | – | | | –0 | – | | | 654,524,856 | |
| | | | | | | | | | | | | | | | |
Other Financial Instruments(b) | | | –0 | – | | | –0 | – | | | –0 | – | | | –0 | – |
| | | | | | | | | | | | | | | | |
Total | | $ | 654,524,856 | | | $ | –0 | – | | $ | –0 | – | | $ | 654,524,856 | |
| | | | | | | | | | | | | | | | |
| (a) | | See Portfolio of Investments for sector classifications. |
| (b) | | Other financial instruments are derivative instruments, such as futures, forwards and swaps, which are valued at the unrealized appreciation/(depreciation) on the instrument. Other financial instruments may also include swaps with upfront premiums, options written and swaptions written which are valued at market value. |
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.
13
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, 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. The Portfolio accounts for distributions received from REIT investments or from regulated investment companies as dividend income, realized gain, or return of capital based on information provided by the REIT or the investment company.
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 (the “Expense Caps”) 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, 2020, 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, 2020, the reimbursement for such services amounted to $73,980.
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 $1,636 for the year ended December 31, 2020.
14
| | |
| |
| | | AB Variable Products Series Fund |
The Portfolio may invest in AB Government Money Market Portfolio (the “Government Money Market Portfolio”) which has a contractual annual advisory fee rate of .20% of the portfolio’s average daily net assets and bears its own expenses. The Adviser has contractually agreed to waive .10% of the advisory fee of Government Money Market Portfolio (resulting in a net advisory fee of .10%) until August 31, 2021. In connection with the investment by the Portfolio in Government Money Market Portfolio, the Adviser has contractually agreed to waive its advisory fee from the Portfolio in an amount equal to the Portfolio’s pro rata share of the effective advisory fee of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. For the year ended December 31, 2020, such waiver amounted to $9,507.
A summary of the Portfolio’s transactions in AB mutual funds for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | |
Portfolio | | Market Value
12/31/19
(000) | | | Purchases
at Cost
(000) | | | Sales
Proceeds
(000) | | | Market Value
12/31/20
(000) | | | Dividend
Income
(000) | |
Government Money Market Portfolio | | $ | 5,072 | | | $ | 149,693 | | | $ | 144,507 | | | $ | 10,258 | | | $ | 40 | |
Government Money Market Portfolio* | | | 1,054 | | | | 13,660 | | | | 14,714 | | | | 0 | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | | | | | | | | | | | | $ | 10,258 | | | $ | 41 | |
| | | | | | | | | | | | | | | | | | | | |
| * | | Investments of cash collateral for securities lending transactions (see Note E). |
During the second quarter of 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, completed the sale of a minority stake in its subsidiary, AXA Equitable Holdings, Inc. (now named Equitable Holdings, Inc.)(“Equitable”), through an initial public offering. Equitable is the holding company for a diverse group of financial services companies, including an approximate 65% economic interest in the Adviser and a 100% interest in AllianceBernstein Corporation, the general partner of the Adviser. Since the initial sale, AXA has completed additional offerings, most recently during the fourth quarter of 2019. As a result, AXA currently owns less than 10% of the outstanding shares of common stock of Equitable, and no longer owns a controlling interest in Equitable. AXA previously announced its intention to sell its entire interest in Equitable over time, subject to market conditions and other factors (the “Plan”). Most of AXA’s remaining Equitable shares are to be delivered on redemption of AXA bonds mandatorily exchangeable into Equitable shares and maturing in May 2021. AXA retains sole discretion to determine the timing of any future sales of its remaining shares of Equitable common stock.
Sales under the Plan that were completed on November 13, 2019 resulted in the indirect transfer of a “controlling block” of voting securities of the Adviser (a “Change of Control Event”) and may have been deemed to have been an “assignment” causing a termination of the Portfolio’s investment advisory and administration agreements. In order to ensure that investment advisory and administration services could continue uninterrupted in the event of a Change of Control Event, the Board previously approved new investment advisory and administration agreements with the Adviser, and shareholders of the Portfolio subsequently approved the new investment advisory agreement. These agreements became effective on November 13, 2019.
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.
15
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments) for the year ended December 31, 2020 were as follows:
| | | | | | | | |
| | | Purchases | | | Sales | |
Investment securities (excluding U.S. government securities) | | $ | 312,913,037 | | | $ | 327,498,208 | |
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 | | $ | 526,024,159 | |
| | | | |
Gross unrealized appreciation | | $ | 148,566,343 | |
Gross unrealized depreciation | | | (20,065,646 | ) |
| | | | |
Net unrealized appreciation | | $ | 128,500,697 | |
| | | | |
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, 2020.
2. Currency Transactions
The Portfolio may invest in non-U.S. Dollar-denominated 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 collateral and/or non-cash collateral. Non-cash collateral will include only securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Portfolio cannot sell or repledge any non-cash collateral, such collateral will not be reflected in the portfolio of investments. If a loan is collateralized 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. If the Portfolio receives non-cash collateral, the Portfolio will receive a fee from the borrower generally equal to a negotiated percentage of the market value of the loaned securities. 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; however, these distributions will not be afforded the same preferential tax treatment as qualified dividends. The Portfolio will not be able to exercise voting rights with respect to 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. Collateral received and securities loaned are marked to market daily to ensure that the securities loaned are secured by collateral. The lending agent currently invests the cash collateral received in Government Money Market Portfolio, 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. The collateral will be adjusted the next business day to maintain the required collateral amount. The amounts of securities lending income from the borrowers and Government Money Market Portfolio are reflected in the statement of operations. When the Portfolio earns net securities lending income from Government Money Market Portfolio, the income is inclusive of a rebate expense paid to the borrower. In connection with the cash collateral
16
| | |
| |
| | | AB Variable Products Series Fund |
investment by the Portfolio in Government Money Market Portfolio, the Adviser has agreed to waive a portion of the Portfolio’s share of the advisory fees of Government Money Market Portfolio, as borne indirectly by the Portfolio as an acquired fund fee and expense. When the Portfolio lends securities, its investment performance will continue to reflect changes in the value of the securities loaned. A principal risk of lending portfolio securities is that the borrower may fail to return the loaned securities upon termination of the loan and that the collateral will not be sufficient to replace the loaned securities. The lending agent has agreed to indemnify the Portfolio in the case of default of any securities borrower.
A summary of the Portfolio’s transactions surrounding securities lending for the year ended December 31, 2020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | |
Market Value of
Securities on Loan* | | | Cash Collateral* | | | Market Value of
Non-Cash
Collateral* | | | Income from
Borrowers | | | Government Money Market Portfolio | |
| | Income
Earned | | | Advisory Fee
Waived | |
| $ | 47,728,040 | | | $ | 0 | | | $ | 49,151,560 | | | $ | 60,026 | | | $ | 963 | | | $ | 130 | |
| *As | | of December 31, 2020. |
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,
2020 | | | Year Ended
December 31,
2019 | | | | | | Year Ended
December 31,
2020 | | | Year Ended
December 31,
2019 | |
Class A | |
Shares sold | | | 2,448,083 | | | | 1,099,281 | | | | | | | $ | 33,752,481 | | | $ | 19,873,600 | |
Shares issued in reinvestment of dividends and distributions | | | 788,663 | | | | 1,454,025 | | | | | | | | 10,812,568 | | | | 23,904,178 | |
Shares redeemed | | | (2,229,236 | ) | | | (1,881,324 | ) | | | | | | | (32,550,890 | ) | | | (33,866,418 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase | | | 1,007,510 | | | | 671,982 | | | | | | | $ | 12,014,159 | | | $ | 9,911,360 | |
| | | | | | | | | | | | | | | | | | | | |
Class B | |
Shares sold | | | 4,230,893 | | | | 1,763,040 | | | | | | | $ | 51,341,662 | | | $ | 31,584,082 | |
Shares issued in reinvestment of dividends and distributions | | | 1,579,260 | | | | 2,896,206 | | | | | | | | 21,414,765 | | | | 47,150,231 | |
Shares redeemed | | | (4,535,252 | ) | | | (3,146,774 | ) | | | | | | | (67,534,661 | ) | | | (57,033,023 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net increase | | | 1,274,901 | | | | 1,512,472 | | | | | | | $ | 5,221,766 | | | $ | 21,701,290 | |
| | | | | | | | | | | | | | | | | | | | |
At December 31, 2020, certain shareholders of the Portfolio owned 72% in aggregate of the Portfolio’s outstanding shares. Significant transactions by such shareholders, if any, may impact the Portfolio’s performance.
NOTE G: Risks Involved in Investing in the Portfolio
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, including public health crises (including the occurrence of a contagious disease or illness), that affect large portions of the market. It includes the risk that a particular style of investing, such as the Portfolio’s value approach, 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- and mid-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 more difficult to trade 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.
17
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| NOTES TO FINANCIAL STATEMENTS | | |
| |
| (continued) | | AB Variable Products Series Fund |
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 on the statement of assets and liabilities.
LIBOR Transition and Associated Risk—A Portfolio may invest in debt securities, derivatives or other financial instruments that utilize the London Interbank Offered Rate, or “LIBOR,” as a “benchmark” or “reference rate” for various interest rate calculations. In July 2017, the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced a desire to phase out the use of LIBOR by the end of 2021. Although widely used LIBOR rates are intended to be published until June 2023, banks are strongly encouraged to cease entering into agreements with counterparties referencing LIBOR by the end of 2021. Although financial regulators and industry working groups have suggested alternative reference rates, such as the European Interbank Offer Rate, the Sterling Overnight Interbank Average Rate and the Secured Overnight Financing Rate, global consensus on alternative rates is lacking and the process for amending existing contracts or instruments to transition away from LIBOR is underway but remains incomplete. The elimination of LIBOR or changes to other reference rates or any other changes or reforms to the determination or supervision of reference rates could have an adverse impact on the market for, or value of, any securities or payments linked to those reference rates, which may adversely affect a Portfolio’s performance and/or net asset value. Uncertainty and risk also remain regarding the willingness and ability of issuers and lenders to include revised provisions in new and existing contracts or instruments. Consequently, the transition away from LIBOR to other reference rates may lead to increased volatility and illiquidity in markets that are tied to LIBOR, fluctuations in values of LIBOR-related investments or investments in issuers that utilize LIBOR, increased difficulty in borrowing or refinancing and diminished effectiveness of hedging strategies, potentially adversely affecting a Portfolio’s performance. Furthermore, the risks associated with the expected discontinuation of LIBOR and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. Because the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021.
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.
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. Some of these techniques may incorporate, or rely upon, quantitative models, but there is no guarantee that these models will generate accurate forecasts, reduce risk or otherwise perform as expected.
NOTE H: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Portfolio, participate in a $325 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, 2020.
NOTE I: Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended December 31, 2020 and December 31, 2019 were as follows:
| | | | | | | | |
| | | 2020 | | | 2019 | |
Distributions paid from: | | | | | | | | |
Ordinary income | | $ | 4,931,851 | | | $ | 7,298,543 | |
Net long-term capital gains | | | 27,295,482 | | | | 63,755,866 | |
| | | | | | | | |
Total taxable distributions | | $ | 32,227,333 | | | $ | 71,054,409 | |
| | | | | | | | |
18
| | |
| |
| | | AB Variable Products Series Fund |
As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| | | | |
Undistributed ordinary income | | $ | 5,653,886 | |
Accumulated capital and other losses | | | (21,193,226 | )(a) |
Unrealized appreciation/(depreciation) | | | 128,500,697 | (b) |
| | | | |
Total accumulated earnings/(deficit) | | $ | 112,961,357 | |
| | | | |
| (a) | | As of December 31, 2020, the Portfolio had a net capital loss carryforward of $21,193,226. |
| (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 realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December 31, 2020, the Portfolio had a net long-term capital loss carryforward of $21,193,226, which may be carried forward for an indefinite period.
During the current fiscal year, there were no permanent differences that resulted in adjustments to distributable earnings 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.
19
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| |
| FINANCIAL HIGHLIGHTS | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS A | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $17.91 | | | | $16.93 | | | | $21.68 | | | | $20.29 | | | | $17.29 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .17 | | | | .16 | | | | .13 | | | | .10 | | | | .10 | † |
Net realized and unrealized gain (loss) on investment transactions | | | .20 | | | | 3.04 | | | | (3.04 | ) | | | 2.41 | | | | 4.09 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .37 | | | | 3.20 | | | | (2.91 | ) | | | 2.51 | | | | 4.19 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.16 | ) | | | (.11 | ) | | | (.11 | ) | | | (.09 | ) | | | (.11 | ) |
Distributions from net realized gain on investment transactions | | | (.73 | ) | | | (2.11 | ) | | | (1.73 | ) | | | (1.03 | ) | | | (1.08 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.89 | ) | | | (2.22 | ) | | | (1.84 | ) | | | (1.12 | ) | | | (1.19 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $17.39 | | | | $17.91 | | | | $16.93 | | | | $21.68 | | | | $20.29 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 3.37 | % | | | 20.10 | % | | | (15.03 | )% | | | 13.15 | % | | | 25.09 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $222,441 | | | | $211,046 | | | | $188,052 | | | | $233,652 | | | | $231,197 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | .83 | % | | | .82 | % | | | .81 | % | | | .81 | % | | | .82 | % |
Expenses, before waivers/reimbursements | | | .83 | % | | | .83 | % | | | .81 | % | | | .82 | % | | | .83 | % |
Net investment income (b) | | | 1.17 | % | | | .90 | % | | | .61 | % | | | .47 | % | | | .53 | %† |
Portfolio turnover rate | | | 58 | % | | | 33 | % | | | 39 | % | | | 33 | % | | | 57 | % |
See footnote summary on page 21.
20
| | |
| | |
| | |
| |
| | | AB Variable Products Series Fund |
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
| | | | | | | | | | | | | | | | | | | | |
| | | CLASS B | |
| | | Year Ended December 31, | |
| | | 2020 | | | 2019 | | | 2018 | | | 2017 | | | 2016 | |
Net asset value, beginning of period | | | $17.72 | | | | $16.75 | | | | $21.48 | | | | $20.12 | | | | $17.15 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Income From Investment Operations | | | | | | | | | | | | | | | | | | | | |
Net investment income (a)(b) | | | .13 | | | | .12 | | | | .07 | | | | .05 | | | | .05 | † |
Net realized and unrealized gain (loss) on investment transactions | | | .18 | | | | 3.02 | | | | (3.02 | ) | | | 2.39 | | | | 4.06 | |
| | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in net asset value from operations | | | .31 | | | | 3.14 | | | | (2.95 | ) | | | 2.44 | | | | 4.11 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Less: Dividends and Distributions | | | | | | | | | | | | | | | | | | | | |
Dividends from net investment income | | | (.11 | ) | | | (.06 | ) | | | (.05 | ) | | | (.05 | ) | | | (.06 | ) |
Distributions from net realized gain on investment transactions | | | (.73 | ) | | | (2.11 | ) | | | (1.73 | ) | | | (1.03 | ) | | | (1.08 | ) |
| | | | | | | | | | | | | | | | | | | | |
Total dividends and distributions | | | (.84 | ) | | | (2.17 | ) | | | (1.78 | ) | | | (1.08 | ) | | | (1.14 | ) |
| | | | | | | | | | | | | | | | | | | | |
Net asset value, end of period | | | $17.19 | | | | $17.72 | | | | $16.75 | | | | $21.48 | | | | $20.12 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Total Return | | | | | | | | | | | | | | | | | | | | |
Total investment return based on net asset value (c)* | | | 3.05 | % | | | 19.90 | % | | | (15.29 | )% | | | 12.85 | % | | | 24.79 | %† |
| | | | | | | | | | | | | | | | | | | | |
Ratios/Supplemental Data | | | | | | | | | | | | | | | | | | | | |
Net assets, end of period (000’s omitted) | | | $432,719 | | | | $423,246 | | | | $374,941 | | | | $469,501 | | | | $455,422 | |
Ratio to average net assets of: | | | | | | | | | | | | | | | | | | | | |
Expenses, net of waivers/reimbursements | | | 1.08 | % | | | 1.07 | % | | | 1.06 | % | | | 1.06 | % | | | 1.07 | % |
Expenses, before waivers/reimbursements | | | 1.08 | % | | | 1.08 | % | | | 1.06 | % | | | 1.07 | % | | | 1.08 | % |
Net investment income (b) | | | .91 | % | | | .65 | % | | | .36 | % | | | .22 | % | | | .28 | %† |
Portfolio turnover rate | | | 58 | % | | | 33 | % | | | 39 | % | | | 33 | % | | | 57 | % |
| (a) | | Based on average shares outstanding. |
| (b) | | Net of expenses waived/reimbursed by the Adviser. |
| (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. |
| † | | For the year ended December 31, 2016, the amount includes a refund for overbilling of prior years’ custody out of pocket fees as follows: |
| | | | |
Net Investment
Income Per Share | | Net Investment
Income Ratio | | Total
Return |
| $.001 | | .003% | | .003% |
| * | | 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, 2018 and December 31, 2017 by .07% and .11%, respectively. |
See notes to financial statements.
21
| | |
| | |
| REPORT OF INDEPENDENT REGISTERED | | |
| |
| PUBLIC ACCOUNTING FIRM | | AB Variable Products Series Fund |
To the Shareholders and the Board of Directors of AB Small/Mid Cap Value Portfolio:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of AB Small/Mid Cap Value Portfolio (the “Portfolio”) (one of the portfolios constituting AB Variable Products Series Fund, Inc. (the “Fund”)), including the portfolio of investments, as of December 31, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Portfolio (one of the portfolios constituting AB Variable Products Series Fund, Inc.) at December 31, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Portfolio’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more of the AB investment companies since 1968.
New York, New York
February 12, 2021
22
| | |
| | |
| | |
| |
| 2020 TAX INFORMATION (unaudited) | | AB 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, 2020. For corporate shareholders, 100% of dividends paid qualify for the dividends received deduction. The Portfolio designates $27,295,482 of dividends paid as long-term capital gain dividends.
23
| | |
| | |
| | |
| |
| SMALL/MID CAP VALUE PORTFOLIO | | AB Variable Products Series Fund |
| | |
| BOARD OF DIRECTORS | | |
Marshall C. Turner, Jr.(1), Chairman Jorge A. Bermudez(1) Michael J. Downey(1) Nancy P. Jacklin(1) | | Robert M. Keith*, President and
Chief Executive Officer Jeanette W. Loeb(1) Carol C. McMullen(1) Garry L. Moody(1) Earl D. Weiner(1) |
| | |
| | |
| OFFICERS | | |
James W. MacGregor(2), Vice President Erik A. Turenchalk(2), Vice President Emilie D. Wrapp, Secretary Michael B. Reyes, Senior Analyst | | 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 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 (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. Messrs. MacGregor and Turenchalk are the investment professionals with the most significant responsibility for the day-to-day management of the Portfolio’s portfolio. |
| * | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. |
24
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| |
| MANAGEMENT OF THE FUND | | AB 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 AND
(YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
| INTERESTED DIRECTOR | | | | | | |
| | | | | | | | |
Robert M. Keith,#
1345 Avenue of the Americas
New York, NY 10105
60
(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. | | | 74 | | | None |
| | | | | | | | |
| INDEPENDENT DIRECTORS | | | | | | |
| | | | | | | | |
Marshall C. Turner, Jr.,##
Chairman of the Board
79
(2005) | | Private Investor since prior to 2016. Former Chairman and CEO of Dupont Photomasks, Inc. (components of semi-conductor manufacturing). He was a Director of Xilinx, Inc. (programmable logic semiconductors and adaptable, intelligent computing) from 2007 through August 2020, and is a former director of 33 other companies and organizations. He has extensive operating leadership, and venture capital investing experience, including five interim or full-time CEO roles, and prior service as general partner of institutional venture capital partnerships. He also has extensive non-profit board leadership experience, and currently serves on the boards of two education and science-related non-profit organizations. He has served as a director of one AB Fund since 1992, and director or trustee of all 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 AB Funds since February 2014. | | | 74 | | | None |
| | | | | | | | |
25
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE AND
(YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
INDEPENDENT DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Jorge A. Bermudez,##
69
(2020) | | Private Investor since prior to 2016. Formerly, Chief Risk Officer of Citigroup, Inc., a global financial services company, from November 2007 to March 2008, Chief Executive Officer of Citigroup’s Commercial Business Group in North America and Citibank Texas from 2005 to 2007, and a variety of other executive and leadership roles at various businesses within Citigroup prior to then; Chairman (2018) of the Texas A&M Foundation Board of Trustees (Trustee since 2013) and Chairman of the Smart Grid Center Board at Texas A&M University since 2012; director of, among others, Citibank N.A. from 2005 to 2008, the Federal Reserve Bank of Dallas, Houston Branch from 2009 to 2011, the Federal Reserve Bank of Dallas from 2011 to 2017, and the Electric Reliability Council of Texas from 2010 to 2016. He has served as director or trustee of the AB Funds since January 2020. | | | 74 | | | Moody’s Corporation since April 2011 |
| | | | | | | | |
Michael J. Downey,##
77
(2005) | | Private Investor since prior to 2016. Formerly, Chairman of The Asia Pacific Fund, Inc. (registered investment company) since prior to 2016 until January 2019. 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. | | | 74 | | | None |
| | | | | | | | |
Nancy P. Jacklin,##
72
(2006) | | Private Investor since prior to 2016. Professorial Lecturer at the Johns Hopkins School of Advanced International Studies (2008–2015). 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 Chair of the Governance and Nominating Committees of the AB Funds since August 2014. | | | 74 | | | None |
| | | | | | | | |
26
| | |
| |
| | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE AND
(YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
INDEPENDENT DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Jeanette W. Loeb,##
68 (2020) | | Chief Executive Officer of PetCareRx (e-commerce pet pharmacy) from 2002 to 2011 and 2015 to present. Director of New York City Center since 2005. She was a director of AB Multi-Manager Alternative Fund, Inc. (fund of hedge funds) from 2012 to 2018. Formerly, affiliated with Goldman Sachs Group, Inc. (financial services) from 1977 to 1994, including as a partner thereof from 1986 to 1994. She has served as director or trustee of the AB Funds since April 2020. | | | 74 | | | Apollo Investment Corp. (business development company) since August 2011 |
| | | | | | | | |
Carol C. McMullen,##
65
(2016) | | Managing Director of Slalom Consulting (consulting) since 2014, private investor and a member of the Advisory Board of Butcher Box (since 2018). Formerly, member, Partners Healthcare Investment Committee (2010–2019); Director of Norfolk & Dedham Group (mutual property and casualty insurance) from 2011 until November 2016; Director of Partners Community Physicians Organization (healthcare) from 2014 until December 2016; and Managing Director of The Crossland Group (consulting) from 2012 until 2013. She has held a number of senior positions in the asset and wealth management industries, including at Eastern Bank (where her roles included President of Eastern Wealth Management), Thomson Financial (Global Head of Sales for Investment Management), and Putnam Investments (where her roles included Chief Investment Officer, Core and Growth and Head of Global Investment Research). She has served on a number of private company and non-profit boards, and as a director or trustee of the AB Funds since June 2016. | | | 74 | | | None |
| | | | | | | | |
Garry L. Moody,##
68
(2008) | | Private Investor since prior to 2016. 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), where he was responsible for accounting, pricing, custody and reporting for the Fidelity mutual funds; 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 the Trustee Advisory Board of BoardIQ, a biweekly publication focused on issues and news affecting directors of mutual funds. He is also a member of the Investment Company Institute’s Board of Governors and the Independent Directors Council’s Governing Council. He has served as a director or trustee, and as Chairman of the Audit Committees, of the AB Funds since 2008. | | | 74 | | | None |
27
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| MANAGEMENT OF THE FUND | | |
| |
| (continued) | | AB Variable Products Series Fund |
| | | | | | | | |
NAME, ADDRESS*,
AGE AND
(YEAR FIRST ELECTED)** | | PRINCIPAL
OCCUPATION(S),
DURING PAST FIVE YEARS
AND OTHER INFORMATION*** | | PORTFOLIOS
IN AB FUND
COMPLEX
OVERSEEN BY
DIRECTOR | | | OTHER PUBLIC
COMPANY
DIRECTORSHIPS
CURRENTLY
HELD BY
DIRECTOR
|
INDEPENDENT DIRECTORS (continued) | | | | | | |
| | | | | | | | |
Earl D. Weiner,##
81
(2007) | | Senior Counsel since 2017, Of Counsel from 2007 to 2016, and Partner prior to then, of the law firm Sullivan & Cromwell LLP. He 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. | | | 74 | | | None |
| * | The address for each of the Fund’s disinterested Directors is c/o AllianceBernstein L.P., Attention: Legal and Compliance Department—Mutual Fund Legal, 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. He is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| ## | Member of the Audit Committee, the Governance and Nominating Committee, and the Independent Directors Committee. |
28
| | |
| |
| | | AB 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^
60 | | President and Chief Executive Officer | | See biography above. |
| | | | |
James W. MacGregor
53 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. He is also Chief Investment Officer of US Small and Mid-Cap Value Equities. |
| | | | |
Erik A. Turenchalk
48 | | Vice President | | Senior Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Emilie D. Wrapp
65 | | Secretary | | Senior Vice President, Assistant General Counsel and Assistant Secretary of ABI **, with which she has been associated since prior to 2016. |
| | | | |
Michael B. Reyes
44 | | Senior Analyst | | Vice President of the Adviser**, with which he has been associated since prior to 2016. |
| | | | |
Joseph J. Mantineo
61 | | Treasurer and Chief Financial Officer | | Senior Vice President of AllianceBernstein Investor Services, Inc. (“ABIS”)**, with which he has been associated since prior to 2016. |
| | | | |
Phyllis J. Clarke
60 | | Controller | | Vice President of ABIS**, with which she has been associated since prior to 2016. |
| | | | |
Vincent S. Noto 56 | | Chief Compliance Officer | | Senior Vice President and Mutual Fund Chief Compliance Officer of the Adviser** since prior to 2016. |
| * | | 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. |
| ^ | | Mr. Keith is expected to retire as President, Chief Executive Officer and a Director of the Fund as of March 31, 2021 and from the Adviser effective June 30, 2021. Mr. Onur Erzan, Senior Vice President and Head of the Global Client Group of the Adviser, has been elected President, Chief Executive Officer and a Director of the Fund, effective April 1, 2021. |
| | | 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.abfunds.com, for a free prospectus or SAI. |
29
| | |
| | |
| | |
| |
| SMALL/MID CAP VALUE PORTFOLIO | | AB Variable Products Series Fund |
OPERATION AND EFFECTIVENESS OF THE PORTFOLIO’S LIQUIDITY RISK MANAGEMENT PROGRAM:
In October 2016, the Securities and Exchange Commission (“SEC”) adopted the open-end fund liquidity rule (the “Liquidity Rule”). In June 2018 the SEC adopted a requirement that funds disclose information about the operation and effectiveness of their Liquidity Risk Management Program (“LRMP”) in their reports to shareholders.
One of the requirements of the Liquidity Rule is for the Portfolio to designate an Administrator of the Portfolio’s Liquidity Risk Management Program. The Administrator of the Portfolio’s LRMP is AllianceBernstein L.P., the Portfolio’s investment adviser (the “Adviser”). The Adviser has delegated the responsibility to its Liquidity Risk Management Committee (the “Committee”). Another requirement of the Liquidity Rule is for the Portfolio’s Board of Directors (the “Fund Board”) to receive an annual written report from the Administrator of the LRMP, which addresses the operation of the Portfolio’s LRMP and assesses its adequacy and effectiveness. The Adviser provided the Fund Board with such annual report during the first quarter of 2020, which covered the period December 1, 2018 through December 31, 2019 (the “Program Reporting Period”).
The LRMP’s principal objectives include supporting the Portfolio’s compliance with limits on investments in illiquid assets and mitigating the risk that the Portfolio will be unable to meet its redemption obligations in a timely manner. Pursuant to the LRMP, the Portfolio classifies the liquidity of its portfolio investments into one of the four categories defined by the SEC: Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid. These classifications are reported to the SEC on Form N-PORT.
During the Program Reporting Period, the Committee reviewed whether the Portfolio’s strategy is appropriate for an open-end structure, taking into account any holdings of less liquid and illiquid assets. If the Portfolio participated in derivative transactions, the exposure from such transactions were considered in the LRMP. The Committee also performed an analysis to determine whether the Portfolio is required to maintain a Highly Liquid Investment Minimum (“HLIM”). The Committee also incorporated the following information when determining the Portfolio’s reasonably anticipated trading size for purposes of liquidity monitoring: historical net redemption activity, a Portfolio’s concentration in an issuer, shareholder concentration, investment performance, total net assets, and distribution channels.
The Adviser informed the Fund Board that the Committee believes the Portfolio’s LRMP is adequately designed, has been implemented as intended, and has operated effectively since its inception. No material exceptions have been noted since the implementation of the LRMP, and there were no liquidity events that impacted the Portfolio or its ability to timely meet redemptions during the Program Reporting Period.
30
| | |
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| |
| CONTINUANCE DISCLOSURE | | AB Variable Products Series Fund |
INFORMATION REGARDING THE REVIEW AND APPROVAL OF THE FUND’S ADVISORY AGREEMENT
The disinterested directors (the “directors”) of AB Variable Products Series Fund, Inc. (the “Company”) unanimously approved the continuance of the Company’s Advisory Agreement with the Adviser in respect of AB Small/Mid Cap Value Portfolio (the “Fund”) at a meeting held by video conference on May 5-7, 2020 (the “Meeting”).
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 additional materials, including comparative analytical data prepared by the Senior Analyst for the Fund. The directors also discussed the proposed continuance in private sessions with counsel.
The directors considered their knowledge of the nature and quality of the services provided by the Adviser to the Fund 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 AB Funds. The directors noted that they have four regular meetings each year, at each of which they review extensive materials and information from the Adviser, including information on the investment performance of the Fund.
The directors also considered all factors they believed relevant, including the specific matters discussed below. During the course of their deliberations, the directors evaluated, among other things, the reasonableness of the advisory fee. 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 Fund and the overall arrangements between the Fund 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 Fund. The directors noted that the Adviser from time to time reviews the Fund’s investment strategies and from time to time proposes changes intended to improve the Fund’s relative or absolute performance for the directors’ consideration. They also noted the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Adviser. The directors also considered that the Advisory Agreement provides that the Fund will reimburse the Adviser for the cost to it of providing certain clerical, accounting, administrative and other services to the Fund 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 Fund 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 former Senior Officer/Independent Compliance Officer. The quality of administrative and other services, including the Adviser’s role in coordinating the activities of the Fund’s other service providers, also was considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided to the Fund under the Advisory Agreement.
Costs of Services Provided and Profitability
The directors reviewed a schedule of the revenues and expenses and related notes indicating the profitability of the Fund to the Adviser for calendar years 2018 and 2019 that had been prepared with an expense allocation methodology arrived at in consultation with an independent consultant retained by the Fund’s former Senior Officer/Independent Compliance 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 Fund, including those relating to its subsidiaries that provide transfer agency, distribution and brokerage services to the Fund. The directors recognized that it is difficult to make comparisons of the profitability of the Advisory Agreement with
31
| | |
| SMALL/MID CAP VALUE PORTFOLIO | | |
| CONTINUANCE DISCLOSURE | | |
| |
| (continued) | | AB Variable Products Series Fund |
the profitability of advisory contracts for 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 Fund before taxes and distribution expenses. The directors concluded that the Adviser’s level of profitability from its relationship with the Fund was not unreasonable.
Fall-Out Benefits
The directors considered the other benefits to the Adviser and its affiliates from their relationships with the Fund, including, but not limited to, benefits relating to soft dollar arrangements (whereby investment advisers receive brokerage and research services from brokers that execute agency transactions for their clients); 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 Fund’s Class B shares; brokerage commissions paid by the Fund to brokers affiliated with the Adviser; and transfer agency fees paid by the Fund 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 understood that the Adviser also might derive reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the Meeting, the directors receive detailed performance information for the Fund at each regular Board meeting during the year.
At the Meeting, the directors reviewed performance information prepared by an independent service provider (the “15(c) service provider”), showing the performance of the Class A Shares of the Fund against a group of similar funds (“peer group”) and a larger group of similar funds (“peer universe”), each selected by the 15(c) service provider, and information prepared by the Adviser showing performance of the Class A Shares against a broad-based securities market index, in each case for the 1-, 3-, 5- and 10-year periods ended February 29, 2020 and (in the case of comparisons with the broad-based securities market index) for the period from inception. Based on their review, the directors concluded that the Fund’s investment performance was acceptable.
Advisory Fees and Other Expenses
The directors considered the advisory fee rate payable by the Fund to the Adviser and information prepared by the 15(c) service provider concerning advisory fee rates payable by other funds in the same category as the Fund. 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 compared the Fund’s contractual effective advisory fee rate with a peer group median and noted that it was above the median. The directors also took into account the impact on the advisory fee rate of the administrative expense reimbursement paid to the Adviser in the latest fiscal year.
The directors also considered the Adviser’s fee schedule for other clients utilizing investment strategies similar to those of the Fund. For this purpose, they reviewed the relevant advisory fee information from the Adviser’s Form ADV and in a report from the Fund’s Senior Analyst and noted the differences between the Fund’s fee schedule, on the one hand, and the Adviser’s institutional fee schedule and the schedule of fees charged by the Adviser to any offshore funds and for services to any sub-advised funds utilizing investment strategies similar to those of the Fund, on the other. 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 previously discussed these matters with an independent fee consultant. The directors also compared the advisory fee rate for the Fund with that for another fund advised by the Adviser utilizing similar investment strategies.
The Adviser reviewed with the directors the significantly greater scope of the services it provides to the Fund relative to institutional, offshore fund and sub-advised fund clients. In this regard, the Adviser noted, among other things, that, compared to institutional and offshore or sub-advisory accounts, the Fund (i) demands considerably more portfolio management, research and trading resources due to significantly higher daily cash flows; (ii) has more tax and regulatory restrictions and compliance obligations; (iii) must prepare and file or distribute regulatory and other communications about fund operations; and (iv) must provide shareholder servicing to retail investors. The Adviser also reviewed the greater legal risks presented by the large and changing population of Fund shareholders who may assert claims against the Adviser in individual or class actions, and the greater entrepreneurial risk in offering new fund products, which require substantial investment to launch, may not succeed, and generally must be priced to compete with larger, more established funds resulting in lack of profitability to the Adviser until a new fund achieves scale. In light of the substantial differences in services rendered by the
32
| | |
|
| | |
| |
| | | AB Variable Products Series Fund |
Adviser to institutional, offshore fund and sub-advised fund clients as compared to the Fund, and the different risk profile, the directors considered these fee comparisons inapt and did not place significant weight on them in their deliberations.
In connection with their review of the Fund’s advisory fee, the directors also considered the total expense ratio of the Class A shares of the Fund in comparison to a peer group and a peer universe selected by the 15(c) service provider. The Class A expense ratio of the Fund was based on the Fund’s latest fiscal year. The Adviser had agreed to cap the Fund’s expenses, but the directors noted that the Fund’s expense ratio was currently below the level of the Adviser’s cap. The directors noted that it was likely that the expense ratios of some of the other funds in the Fund’s category were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases might be voluntary or temporary. The directors view expense ratio information as relevant to their evaluation of the Adviser’s services because the Adviser is responsible for coordinating services provided to the Fund by others. Based on their review, the directors concluded that the Fund’s expense ratio was acceptable.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund 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 AB Funds, and presentations from time to time by the Adviser concerning certain of its views on economies of scale. The directors also previously discussed economies of scale with an independent fee consultant. The directors also had requested and received from the Adviser certain updates on economies of scale in advance of the 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 Fund, 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 Fund’s shareholders would benefit from a sharing of economies of scale in the event the Fund’s net assets exceed a breakpoint in the future.
33
VPS-SMCV-0151-1220
(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 Garry L. Moody, Marshall C. Turner, Jr. and Jorge A. Bermudez 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 auditor 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 | |
AB Balanced Wealth Strategy Portfolio | | | 2019 | | | | 72,197 | | | | — | | | | 20,562 | |
| | | 2020 | | | | 72,197 | | | | — | | | | 12,297 | |
AB Global Thematic Growth Portfolio | | | 2019 | | | | 41,926 | | | | — | | | | 11,108 | |
| | | 2019 | | | | 41,926 | | | | — | | | | 3,729 | |
AB Growth & Income Portfolio | | | 2019 | | | | 31,404 | | | | — | | | | 20,242 | |
| | | 2020 | | | | 31,404 | | | | — | | | | 6,443 | |
AB Intermediate Bond Portfolio | | | 2019 | | | | 67,988 | | | | — | | | | 11,588 | |
| | | 2020 | | | | 67,988 | | | | — | | | | 1,089 | |
AB International Growth Portfolio | | | 2019 | | | | 41,926 | | | | — | | | | 13,800 | |
| | | 2020 | | | | 41,926 | | | | — | | | | 3,806 | |
AB International Value Portfolio | | | 2019 | | | | 41,926 | | | | — | | | | 16,385 | |
| | | 2020 | | | | 41,926 | | | | — | | | | 9,096 | |
AB Large Cap Growth Portfolio | | | 2019 | | | | 31,404 | | | | — | | | | 19,278 | |
| | | 2020 | | | | 31,404 | | | | — | | | | 5,623 | |
AB Small Cap Growth Portfolio | | | 2019 | | | | 31,404 | | | | — | | | | 10,149 | |
| | | 2020 | | | | 31,404 | | | | — | | | | 1,630 | |
AB Small/Mid Cap Value Portfolio | | | 2019 | | | | 35,613 | | | | — | | | | 12,381 | |
| | | 2020 | | | | 35,613 | | | | — | | | | 7,674 | |
AB Dynamic Asset Allocation Portfolio | | | 2019 | | | | 85,147 | | | | — | | | | 24,338 | |
| | | 2020 | | | | 85,147 | | | | — | | | | 16,732 | |
AB Global Risk Allocation-Moderate Portfolio | | | 2019 | | | | 36,029 | | | | — | | | | 13,666 | |
| | | 2020 | | | | 36,029 | | | | — | | | | 10,547 | |
(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) | |
AB Balanced Wealth Strategy Portfolio | | | 2019 | | | $ | 864,618 | | | $ | 20,562 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (20,562 | ) |
| | | 2020 | | | $ | 910,348 | | | $ | 12,297 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (12,297 | ) |
AB Global Thematic Growth Portfolio | | | 2019 | | | $ | 855,164 | | | | 11,108 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (11,108 | ) |
| | | 2020 | | | $ | 901,780 | | | $ | 3,729 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (3,729 | ) |
AB Growth & Income Portfolio | | | 2019 | | | $ | 864,298 | | | | 20,242 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (20,242 | ) |
| | | 2020 | | | $ | 904,494 | | | $ | 6,443 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (6,443 | ) |
AB Intermediate Bond Portfolio | | | 2019 | | | $ | 855,644 | | | | 11,588 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (11,588 | ) |
| | | 2020 | | | $ | 899,140 | | | $ | 1,089 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (1,089 | ) |
AB International Growth Portfolio | | | 2019 | | | $ | 857,856 | | | | 13,800 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (13,800 | ) |
| | | 2020 | | | $ | 901,857 | | | $ | 3,806 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (3,806 | ) |
AB International Value Portfolio | | | 2019 | | | $ | 860,441 | | | | 16,385 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (16,385 | ) |
| | | 2020 | | | $ | 907,147 | | | $ | 9,096 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (9,096 | ) |
AB Large Cap Growth Portfolio | | | 2019 | | | $ | 863,334 | | | | 19,278 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (19,278 | ) |
| | | 2020 | | | $ | 903,674 | | | $ | 5,623 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (5,623 | ) |
AB Small Cap Growth Portfolio | | | 2019 | | | $ | 854,205 | | | | 10,149 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,149 | ) |
| | | 2020 | | | $ | 899,681 | | | $ | 1,630 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (1,630 | ) |
AB Small/Mid Cap Value Portfolio | | | 2019 | | | $ | 856,437 | | | | 12,381 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (12,381 | ) |
| | | 2020 | | | $ | 905,725 | | | $ | 7,674 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (7,674 | ) |
AB Dynamic Asset Allocation Portfolio | | | 2019 | | | $ | 868,394 | | | | 24,338 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (24,338 | ) |
| | | 2020 | | | $ | 914,783 | | | $ | 16,732 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (16,732 | ) |
AB Global Risk Allocation-Moderate Portfolio | | | 2019 | | | $ | 857,722 | | | | 13,666 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (13,666 | ) |
| | | 2020 | | | $ | 908,598 | | | $ | 10,547 | |
| | | | | | | | | | | — | |
| | | | | | | | | | | (10,547 | ) |
(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.
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. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable to the registrant.
The following exhibits are attached to this Form N-CSR:
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): AB Variable Products Series Fund, Inc. |
| |
| By: | | /s/ Robert M. Keith |
| | Robert M. Keith |
| | President |
Date: February 12, 2021
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 12, 2021
| | |
| By: | | /s/ Joseph J. Mantineo |
| | Joseph J. Mantineo |
| | Treasurer and Chief Financial Officer |
Date: February 12, 2021
