UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05398
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
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, 2006
Date of reporting period: June 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
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SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN BALANCED SHARES PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
BALANCED SHARES PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
BALANCED SHARES PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ------------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,005.07 $3.68 0.74%
Hypothetical (5% return before expenses) $1,000 $1,021.12 $3.71 0.74%
CLASS A
Actual $1,000 $1,003.96 $4.92 0.99%
Hypothetical (5% return before expenses) $1,000 $1,019.89 $4.96 0.99%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
BALANCED SHARES PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
U.S. Treasury Notes $ 29,866,285 14.6%
U.S. Treasury Bonds 6,331,335 3.1
Citigroup, Inc. 6,198,840 3.0
Federal National Mortgage Assoc.
(Bonds & Common Stock) 5,927,063 2.9
JPMorgan Chase & Co. 5,376,840 2.6
American International Group, Inc. 4,842,100 2.4
Bank of America Corp. 4,598,360 2.3
Time Warner, Inc. (Bonds & Common Stock) 4,576,965 2.2
The Home Depot, Inc. 3,897,531 1.9
Microsoft Corp. 3,874,790 1.9
------------ -----
$ 75,490,109 36.9%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Finance $ 44,009,064 21.5%
U.S. Government & Government Sponsored Agency
Obligations 38,623,003 18.9
Consumer Services 21,646,559 10.6
Technology 17,013,424 8.3
Energy 14,619,037 7.2
Commercial Mortgage Backed Securities 11,676,000 5.7
Utilities 11,594,026 5.7
Consumer Staples 10,604,694 5.2
Health Care 10,499,501 5.1
Capital Goods 8,383,834 4.1
Basic Industry 5,352,926 2.6
Transportation 4,524,485 2.2
Industrials 2,032,084 1.0
Consumer Manufacturing 1,058,037 0.5
Sovereign Debt Obligations 899,624 0.5
Municipal Obligation 418,636 0.2
Conglomerate/Miscellaneous 357,952 0.2
Aerospace & Defense 192,592 0.1
------------ -----
Total Investments* 203,505,478 99.6
Cash and receivables, net of liabilities 912,205 0.4
------------ -----
Net Assets $204,417,683 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
BALANCED SHARES PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-61.1%
FINANCE-16.4%
BANKING - MONEY CENTER-4.1%
JPMorgan Chase & Co. 128,020 $ 5,376,840
The Goldman Sachs Group, Inc. 8,400 1,263,612
Wachovia Corp. 30,700 1,660,256
------------
8,300,708
BANKING - REGIONAL-2.9%
Bank of America Corp. 95,600 4,598,360
Northern Trust Corp. 22,700 1,255,310
------------
5,853,670
BROKERAGE & MONEY MANAGEMENT-0.7%
Merrill Lynch & Co., Inc. 21,100 1,467,716
INSURANCE-4.0%
ACE Ltd. 36,800 1,861,712
American International Group, Inc. 82,000 4,842,100
Axis Capital Holdings Ltd. 52,700 1,507,747
------------
8,211,559
MORTGAGE BANKING-1.7%
Fannie Mae 72,800 3,501,680
MISCELLANEOUS-3.0%
Citigroup, Inc. 128,500 6,198,840
------------
33,534,173
CONSUMER SERVICES-9.7%
BROADCASTING & CABLE-5.9%
CBS Corp. Cl. B 20,300 549,115
Comcast Corp. Cl. A(a) 44,950 1,471,663
Comcast Corp. Special Cl. A (a) 21,200 694,936
News Corp. Cl. A 171,300 3,285,534
Time Warner, Inc. 228,400 3,951,320
Viacom, Inc. Cl. B(a) 49,000 1,756,160
Westwood One, Inc. 32,200 241,500
------------
11,950,228
RESTAURANT & LODGING-1.5%
Hilton Hotels Corp. 49,000 1,385,720
McDonald's Corp. 52,600 1,767,360
------------
3,153,080
RETAIL - GENERAL MERCHANDISE-2.3%
Lowe's Cos., Inc. 9,900 600,633
The Gap, Inc. 14,000 243,600
The Home Depot, Inc. 108,900 3,897,531
------------
4,741,764
------------
19,845,072
TECHNOLOGY-7.0%
COMMUNICATION EQUIPMENT-0.7%
Cisco Systems, Inc. (a) 30,800 601,524
Motorola, Inc. 43,400 874,510
------------
1,476,034
COMPUTER HARDWARE/STORAGE-2.7%
EMC Corp. (a) 111,600 1,224,252
International Business Machines Corp. (IBM) 49,800 3,825,636
Sun Microsystems, Inc. (a) 107,000 444,050
------------
5,493,938
COMPUTER SERVICES-0.3%
Fiserv, Inc.(a) 15,000 680,400
SEMICONDUCTOR CAPITAL EQUIPMENT-0.6%
Applied Materials, Inc. 74,300 1,209,604
SEMICONDUCTOR COMPONENTS-0.2%
Advanced Micro Devices, Inc. (a) 19,900 485,958
SOFTWARE-2.5%
BEA Systems, Inc. (a) 23,400 306,306
Microsoft Corp. 166,300 3,874,790
Oracle Corp. (a) 55,800 808,542
------------
4,989,638
------------
14,335,572
ENERGY-6.4%
DOMESTIC PRODUCERS-1.1%
Noble Energy, Inc. 46,600 2,183,676
INTERNATIONAL-2.8%
ChevronTexaco Corp. 32,000 1,985,920
Exxon Mobil Corp. 62,700 3,846,645
------------
5,832,565
OIL SERVICE-2.0%
Baker Hughes, Inc. 19,400 1,587,890
BJ Services Co. 11,200 417,312
GlobalSantaFe Corp. 5,000 288,750
Nabors Industries Ltd. (a) 50,600 1,709,774
------------
4,003,726
MISCELLANEOUS-0.5%
ConocoPhillips 15,900 1,041,927
------------
13,061,894
CONSUMER STAPLES-4.7%
HOUSEHOLD PRODUCTS-1.6%
Colgate-Palmolive Co. 19,900 1,192,010
The Procter & Gamble Co. 38,100 2,118,360
------------
3,310,370
3
BALANCED SHARES PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
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SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
TOBACCO-1.7%
Altria Group, Inc. 35,700 $ 2,621,451
Loews Corp-Carolina Group 15,800 811,646
------------
3,433,097
MISCELLANEOUS-1.4%
Fortune Brands, Inc. 40,700 2,890,107
------------
9,633,574
HEALTH CARE-4.6%
DRUGS-2.4%
Forest Laboratories, Inc. (a) 11,400 441,066
Lilly Eli & Co. 23,000 1,271,210
Merck & Co., Inc. 23,100 841,533
Pfizer, Inc. 94,800 2,224,956
------------
4,778,765
MEDICAL SERVICES-2.2%
Health Management Associates, Inc. 29,000 571,590
UnitedHealth Group, Inc. 11,800 528,404
WellPoint, Inc. (a) 47,600 3,463,852
------------
4,563,846
------------
9,342,611
CAPITAL GOODS-4.1%
ELECTRICAL EQUIPMENT-1.1%
Emerson Electric Co. 25,800 2,162,298
MISCELLANEOUS-3.0%
General Electric Co. 87,100 2,870,816
Illinois Tool Works, Inc. 15,800 750,500
United Technologies Corp. 41,000 2,600,220
------------
6,221,536
------------
8,383,834
UTILITIES-3.8%
ELECTRIC & GAS UTILITY-0.6%
FirstEnergy Corp. 22,500 1,219,725
TELEPHONE UTILITY-3.2%
AT&T, Inc. 104,600 2,917,294
BellSouth Corp. 51,100 1,849,820
Verizon Communications, Inc. 55,200 1,848,648
------------
6,615,762
------------
7,835,487
BASIC INDUSTRY-2.3%
CHEMICALS-1.9%
Air Products & Chemicals, Inc. 45,900 2,933,928
E.I. du Pont de Nemours & Co. 24,000 998,400
------------
3,932,328
MINING & METALS-0.4%
Alcoa, Inc. 21,000 679,560
------------
4,611,888
TRANSPORTATION-2.0%
AIR FREIGHT-1.7%
United Parcel Service, Inc. 42,600 3,507,258
RAILROAD-0.3%
Union Pacific Corp. 7,100 660,016
------------
4,167,274
CONSUMER MANUFACTURING-0.1%
BUILDING & RELATED-0.1%
Pulte Homes, Inc. 6,500 187,135
Total Common Stocks
(cost $109,420,725) 124,938,514
U.S. GOVERNMENT & GOVERNMENT SPONSORED
AGENCY OBLIGATIONS-18.9%
Federal National Mortgage Assoc.
5.00%, 4/15/15 $ 150 145,021
6.625%, 10/15/07 2,250 2,280,362
U.S. Treasury Bonds
4.25%, 8/15/15 100 93,566
5.375%, 2/15/31 4,400 4,475,970
6.875%, 8/15/25 250 296,445
8.125%, 8/15/21 35 45,120
11.25%, 2/15/15 1,000 1,420,234
U.S. Treasury Notes
1.625%, 1/15/15 (TIPS) 522 486,823
3.00%, 11/15/07-2/15/06 2,680 2,574,492
3.125%, 4/15/09 950 901,090
3.625%, 5/15/13 2,370 2,167,903
3.875%, 5/15/10 150 143,549
4.00%, 4/15/10-11/15/12 1,155 1,087,837
4.125%, 5/15/15 1,309 1,215,479
4.25%, 8/15/13-8/15/14 2,485 2,352,750
5.00%, 2/15/11 590 588,548
5.125%, 5/15/16 1,729 1,726,974
5.625%, 5/15/08 10,790 10,875,143
5.75%, 8/15/10 965 988,710
6.00%, 8/15/09 30 30,749
6.125%, 8/15/07 100 100,902
6.25%, 2/15/07 4,600 4,625,336
Total U.S. Government & Government
Sponsored Agency Obligations
(cost $39,188,992) 38,623,003
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-12.9%
AEROSPACE/DEFENSE-0.1%
Raytheon Co.
4.85%, 1/15/11 $ 200 $ 192,592
AUTOMOTIVE-0.7%
DaimlerChrysler NA Holding Corp.
4.875%, 6/15/10 675 645,233
Ford Motor Credit Co.
4.95%, 1/15/08 750 706,019
------------
1,351,252
BANKING-2.4%
Barclays Bank Plc
8.55%, 9/29/49 (b)(c) 50 55,135
Chuo Mitsui Trust & Banking Co. Ltd.
5.506%, 12/15/49 (b)(c) 300 273,581
Dresdner Funding Trust I
8.151%, 6/30/31 (b) 295 328,830
HBOS Plc
5.375%, 11/29/49 (b)(c) 250 236,770
HSBC Bank USA
5.875%, 11/01/34 560 511,531
Mizuho JGB Investment LLC
9.87%, 12/29/49 (b)(c) 500 535,371
Northern Rock Plc
5.60%, 4/30/49 (b)(c) 445 418,466
Regency Centers LP
5.25%, 8/01/15 300 280,388
Royal Bank of Scotland Group Plc
7.648%, 8/29/49 (c) 250 269,059
Sanwa Bank Ltd.
7.40%, 6/15/11 200 212,253
SB Treasury Co. LLC
9.40%, 12/29/49 (b)(c) 417 442,950
Sovereign Bancorp, Inc.
4.80%, 9/01/10 (b) 200 191,560
Sumitomo Mitsui Banking Corp.
5.625%, 7/15/49 (b)(c) 135 125,903
UBS Preferred Funding Trust II
7.247%, 6/26/49 (c) 250 262,574
UFJ Finance Aruba AEC
6.75%, 7/15/13 200 208,356
Unicredito Italiano Capital Trust
9.20%, 10/29/49 (b)(c) 330 367,067
Wachovia Capital Trust III
5.80%, 8/29/49 (c) 130 126,152
------------
4,845,946
BROADCASTING/MEDIA-0.6%
BSKYB Finance UK Plc
5.625%, 10/15/15 (b) 120 113,645
News America Holdings
8.25%, 10/17/96 60 63,528
9.25%, 2/01/13 100 115,784
News America, Inc.
5.30%, 12/15/14 100 94,896
Time Warner, Inc.
6.875%, 5/01/12 175 180,857
8.375%, 3/15/23 400 444,788
WPP Finance UK Corp.
5.875%, 6/15/14 250 242,242
------------
1,255,740
BUILDING/REAL ESTATE-0.4%
CRH America, Inc.
6.95%, 3/15/12 250 259,295
EOP Operating LP
7.875%, 7/15/31 200 219,516
iStar Financial, Inc.
5.70%, 3/01/14 200 192,821
6.00%, 12/15/10 200 199,270
------------
870,902
CABLE-0.2%
British Sky Broadcasting Plc
8.20%, 7/15/09 100 106,197
Continental Cablevision, Inc.
9.00%, 9/01/08 200 212,581
------------
318,778
CHEMICALS-0.2%
Eastman Chemical
7.25%, 1/15/24 175 177,077
Lubrizol Corp.
5.50%, 10/01/14 275 259,484
------------
436,561
COMMUNICATIONS-0.5%
AT&T Corp.
7.30%, 11/15/11 250 265,383
Embarq Corp.
6.738%, 6/01/13 450 448,638
GTE Northwest, Inc.
Series D
5.55%, 10/15/08 200 197,630
Qwest Corp.
7.875%, 9/01/11 200 202,500
------------
1,114,151
5
BALANCED SHARES PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMUNICATIONS - MOBILE-0.5%
AT&T Wireless Services, Inc.
8.75%, 3/01/31 $ 325 $ 398,457
Mobile Telesystems Finance, SA
9.75%, 1/30/08 230 236,026
Nextel Communications, Inc.
5.95%, 3/15/14 290 278,587
TELUS Corp.
7.50%, 6/01/07 100 101,464
8.00%, 6/01/11 100 108,290
------------
1,122,824
CONGLOMERATE/MISCELLANEOUS-0.2%
Cendant Corp.
6.25%, 1/15/08 250 252,246
Hutchison Whampoa International Ltd.
7.45%, 11/24/33 (b) 100 105,706
------------
357,952
CONTAINERS-0.1%
Packaging Corp. of America
4.375%, 8/01/08 200 194,227
ENERGY-0.7%
Amerada Hess Corp.
7.30%, 8/15/31 350 370,897
Devon Financing Corp.
7.875%, 9/30/31 300 342,589
Enterprise Products Operating LP
Series D
5.60%, 10/15/14 150 141,998
Kinder Morgan Finance Co.
5.30%, 1/05/11 176 162,155
Valero Energy Corp.
4.75%, 6/15/13 300 275,503
XTO Energy, Inc.
7.50%, 4/15/12 100 106,306
------------
1,399,448
FINANCIAL-2.0%
Capital One Bank
6.50%, 6/13/13 400 409,032
Countrywide Home Loan, Inc.
4.25%, 12/19/07 250 244,931
General Electric Capital Corp.
5.00%, 6/15/07 500 497,155
5.875%, 2/15/12 500 502,653
Household Finance Corp.
5.75%, 1/30/07 200 200,177
7.875%, 3/01/07 150 152,102
Lehman Brothers Holdings, Inc.
7.875%, 8/15/10 150 161,409
Merrill Lynch & Co., Inc.
6.00%, 2/17/09 500 503,318
Rabobank Capital Fund II
5.26%, 12/29/49 (b)(c) 230 215,801
Resona Preferred Global Securities Ltd.
7.191%, 12/30/49 (b)(c) 413 414,276
The Goldman Sachs Group, Inc.
6.60%, 1/15/12 500 516,030
6.65%, 5/15/09 200 205,127
------------
4,022,011
FOOD/BEVERAGE-0.2%
Imperial Tobacco
7.125%, 4/01/09 170 174,892
Kraft Foods, Inc.
5.25%, 10/01/13 300 286,494
------------
461,386
HEALTH CARE-0.6%
Boston Scientific Corp.
6.00%, 6/15/11 300 295,957
UnitedHealth Group
5.25%, 3/15/11 200 194,717
WellPoint, Inc.
5.25%, 1/15/16 150 140,579
Wyeth
6.50%, 2/01/34 525 525,637
------------
1,156,890
INDUSTRIAL-0.2%
Inco Ltd.
7.75%, 5/15/12 200 213,485
Tyco International Group, SA
6.00%, 11/15/13 115 113,930
Waste Management, Inc.
6.375%, 11/15/12 175 178,525
------------
505,940
INSURANCE-0.5%
American Reinsurance
7.45%, 12/15/26 140 149,175
Loews Corp.
6.75%, 12/15/06 100 100,241
North Front Pass Through Trust
5.81%, 12/15/24 (b)(c) 500 475,371
The Hartford Financial
Services, Inc.
6.375%, 11/01/08 125 126,778
Zurich Capital Trust
8.376%, 6/01/37 (b) 200 211,425
------------
1,062,990
INSURANCE CARRIERS-0.2%
Liberty Mutual Group
5.75%, 3/15/14 (b) 350 328,744
METALS/MINING-0.0%
Ispat Inland ULC
9.75%, 4/01/14 100 110,250
6
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
MUNICIPAL OBLIGATION-0.2%
Dallas-Fort Worth Texas International
Airport Facility
7.07%, 11/01/24 $ 400 $ 418,636
NON-AIR TRANSPORTATION-0.2%
CSX Corp.
5.50%, 8/01/13 100 97,813
6.75%, 3/15/11 250 259,398
------------
357,211
PETROLEUM PRODUCTS-0.1%
Petronas Capital Ltd.
7.00%, 5/22/12 (b) 150 157,695
PUBLIC UTILITIES - ELECTRIC & GAS-1.5%
American Electric Power Co., Inc.
Series C
5.375%, 3/15/10 250 246,085
CenterPoint Energy Resources Corp.
Series B
7.875%, 4/01/13 450 489,150
Consumers Energy Co.
Series B
5.375%, 4/15/13 150 143,951
FirstEnergy Corp.
Series C
7.375%, 11/15/31 500 536,426
NiSource Finance Corp.
7.875%, 11/15/10 250 267,457
Progress Energy, Inc.
5.85%, 10/30/08 350 350,018
SPI Electricity & Gas Australia Holdings Pty Ltd.
6.15%, 11/15/13 (b) 250 248,680
Texas East Transmission LP
7.30%, 12/01/10 350 367,900
Xcel Energy, Inc.
7.00%, 12/01/10 175 182,287
Yorkshire Power
Series B
6.496%, 2/25/08 200 201,505
------------
3,033,459
PUBLIC UTILITIES - TELEPHONE-0.1%
Windstream Corp.
8.125%, 8/01/13 (b) 214 218,280
PUBLISHING-0.1%
R. H. Donnelley Corp.
8.875%, 1/15/16 (b) 225 226,969
SUPERMARKET/DRUG-0.3%
Safeway, Inc.
4.95%, 8/16/10 400 381,878
5.80%, 8/15/12 310 302,748
------------
684,626
TECHNOLOGY-0.1%
Cisco Systems, Inc.
5.25%, 2/22/11 140 137,403
Motorola, Inc.
7.625%, 11/15/10 64 68,536
------------
205,939
Total Corporate Debt Obligations
(cost $27,158,410) 26,411,399
COMMERCIAL MORTGAGE BACKED SECURITIES-5.7%
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1 Cl. A2
5.787%, 5/11/35 1,610 1,610,701
Series 2005-1 Cl. A3
4.877%, 11/10/42 2,000 1,944,159
Bear Stearns Commercial Mortgage Security
Series 2005-PWR9 Cl. A4A
4.871%, 9/11/42 2,000 1,859,255
Greenwich Capital Commercial Funding Corp.
Series 2005-GG3 Cl. A4
4.799%, 8/10/42 (c) 900 835,751
GS Mortgage Securities Corp. II
Series 2004-GG2 Cl. A6
5.396%, 8/10/38 (c) 600 581,196
JPMorgan Chase Commercial Mortgage Securities Corp.
Series 2005-LDP3 Cl. A2
4.851%, 8/15/42 1,500 1,449,930
Series 2006-CB15 Cl. A4
5.814%, 6/12/43 (c) 176 174,249
LB-UBS Commercial Mortgage Trust
Series 2006-C1 Cl. A4
5.156%, 2/15/31 1,500 1,420,095
Merrill Lynch Mortgage Trust
Series 2004-KEY2 Cl. A4
4.864%, 8/12/39 (c) 400 371,929
Morgan Stanley Capital I
Series 2005- HQ5 Cl. A4
5.168%, 1/14/42 1,500 1,428,735
Total Commercial Mortgage Backed Securities
(cost $12,208,767) 11,676,000
7
BALANCED SHARES PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
PREFERRED STOCKS-0.5%
PUBLIC UTILITIES - ELECTRIC & GAS-0.3%
DTE Energy Trust I $ 20,000 $ 506,800
COMMUNICATIONS-0.1%
Centaur Funding Corp. (b) 200 234,938
BANKING-0.1%
Royal Bank of Scotland Group Plc 10,000 215,200
Total Preferred Stocks
(cost $982,615) 956,938
SOVEREIGN DEBT OBLIGATIONS-0.5%
Korea Development Bank
5.75%, 9/10/13 200 197,874
United Mexican States
6.375%, 1/16/13 700 701,750
Total Sovereign Debt Obligations
(cost $899,745) 899,624
SHORT-TERM INVESTMENT-0.3%
TIME DEPOSIT-0.3%
The Bank of New York
4.25%, 7/03/06
(cost $680,000) 680 680,000
TOTAL INVESTMENTS-99.9%
(cost $190,539,254) 204,185,478
Other assets less liabilities-0.1% 232,205
NET ASSETS-100% $204,417,683
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $5,927,163 or 2.9% of net assets.
(c) Variable rate coupon, rate shown as of June 30, 2006.
Glossary:
TIPS - Treasury Inflation Protected Security
See Notes to Financial Statements.
8
BALANCED SHARES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $190,539,254) $ 204,185,478
Cash 918
Receivable for investment securities sold 1,933,253
Dividends and interest receivable 1,108,356
Receivable for capital stock sold 497
Total assets 207,228,502
LIABILITIES
Payable for investment securities purchased 2,299,118
Payable for capital stock redeemed 221,374
Advisory fee payable 98,897
Administrative fee payable 19,607
Distribution fee payable 9,357
Transfer agent fee payable 119
Accrued expenses 162,347
Total liabilities 2,810,819
NET ASSETS $ 204,417,683
COMPOSITION OF NET ASSETS
Capital stock, at par $ 11,210
Additional paid-in capital 185,422,957
Undistributed net investment income 2,561,751
Accumulated net realized gain on investment transactions 2,775,541
Net unrealized appreciation of investments 13,646,224
$ 204,417,683
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $161,892,465 8,867,991 $18.26
B $ 42,525,218 2,341,960 $18.16
See Notes to Financial Statements.
9
BALANCED SHARES PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 2,119,392
Dividends 1,326,163
Total investment income 3,445,555
EXPENSES
Advisory fee 592,124
Distribution fee--Class B 55,823
Transfer agency--Class A 803
Transfer agency--Class B 210
Custodian 83,201
Printing 59,147
Administrative 39,000
Audit 20,248
Legal 6,147
Directors' fees 638
Miscellaneous 7,692
Total expenses 865,033
Net investment income 2,580,522
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 3,148,306
Net change in unrealized appreciation/depreciation of
investments (4,591,421)
Net loss on investment transactions (1,443,115)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,137,407
See Notes to Financial Statements.
10
BALANCED SHARES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 2,580,522 $ 5,145,410
Net realized gain on investment
transactions 3,148,306 20,713,391
Net change in unrealized
appreciation/depreciation of
investments (4,591,421) (17,354,902)
Net increase in net assets from
operations 1,137,407 8,503,899
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (4,150,250) (4,723,307)
Class B (985,740) (1,088,094)
Net realized gain on investment
transactions
Class A (4,500,374) -0-
Class B (1,194,218) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (6,386,642) (20,841,594)
Total decrease (16,079,817) (18,149,096)
NET ASSETS
Beginning of period 220,497,500 238,646,596
End of period (including undistributed
net investment income of $2,561,751
and $5,117,219, respectively) $ 204,417,683 $ 220,497,500
See Notes to Financial Statements.
11
BALANCED SHARES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Balanced Shares Portfolio (the "Portfolio"), formerly
AllianceBernstein Total Return Portfolio, is a series of AllianceBernstein
Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment
objective is total return consistent with reasonable risk, through a
combination of income and long-term growth of capital. Prior to February 1,
2006, the Portfolio's investment objective was to seek to achieve a high return
through a combination of current income and capital appreciation. The Portfolio
is diversified as defined under the Investment Company Act of 1940. The Fund
was incorporated in the State of Maryland on November 17, 1987, as an open-end
series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
interim and may materially affect the value of those securities. To account for
this, the Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. 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 securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Portfolio amortizes premiums or accretes discounts as adjustments to interest
income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .625% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
13
BALANCED SHARES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006 amounted to $56,902, none of which was paid to Sanford C.
Bernstein &Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 29,751,953 $ 36,827,992
U.S. government securities 15,985,148 16,385,516
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $ 20,652,319
Gross unrealized depreciation (7,006,095)
Net unrealized appreciation $ 13,646,224
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contracts and the closing of
such contracts would be included in net realized gain or loss on foreign
currency transactions.
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 143,642 271,384 $ 2,780,267 $ 5,117,800
Shares issued
in reinvestment
of dividends
and distributions 475,571 253,261 8,650,624 4,723,307
Shares redeemed (876,298) (1,620,419) (16,847,875) (30,581,492)
Net decrease (257,085) (1,095,774) $ (5,416,984) $ (20,740,385)
CLASS B
Shares sold 41,445 234,077 $ 798,741 $ 4,387,245
Shares issued
in reinvestment
of dividends
and distributions 120,506 58,657 2,179,958 1,088,094
Shares redeemed (207,521) (297,472) (3,948,357) (5,576,548)
Net decrease (45,570) (4,738) $ (969,658) $ (101,209)
15
BALANCED SHARES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 5,811,401 $ 5,014,005
Total taxable distributions 5,811,401 5,014,005
Total distributions paid $ 5,811,401 $ 5,014,005
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 5,324,171
Undistributed long-term capital gains 5,468,508(a)
Unrealized appreciation/(depreciation) 17,884,012(b)
Total accumulated earnings/(deficit) $ 28,676,691
(a) During the current fiscal year, the Portfolio utilized capital loss
carryforwards of $14,904,349.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints
17
BALANCED SHARES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
include substantially identical factual allegations, which appear to be based
in large part on the SEC Order and the NYAG Order. The claims in the mutual
fund derivative consolidated amended complaint are generally based on the
theory that all fund advisory agreements, distribution agreements and 12b-1
plans between the Adviser and the AllianceBernstein Funds should be
invalidated, regardless of whether market timing occurred in each individual
fund, because each was approved by fund trustees on the basis of materially
misleading information with respect to the level of market timing permitted in
funds managed by the Adviser. The claims asserted in the other three
consolidated amended complaints are similar to those that the respective
plaintiffs asserted in their previous federal lawsuits. All of these lawsuits
seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
19
BALANCED SHARES PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
--------------- ------------ ------------ ------------ --------- ------------
Net asset value,
beginning of period $19.18 $18.94 $17.76 $15.30 $17.65 $18.01
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (b) .24 .43 .46(c) .42 .45 .44
Net realized and unrealized
gain (loss) on investment
transactions (.14) .30 1.12 2.47 (2.29) (.01)
Net increase (decrease) in net
asset value from operations .10 .73 1.58 2.89 (1.84) .43
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.49) (.49) (.40) (.43) (.32) (.28)
Distributions from net realized
gain on investment
transactions (.53) -0- -0- -0- (.19) (.42)
Distributions in excess of
net realized gain on
investment transactions -0- -0- -0- -0- -0- (.09)
Total dividends and
Distributions (1.02) (.49) (.40) (.43) (.51) (.79)
Net asset value, end of period $18.26 $19.18 $18.94 $17.76 $15.30 $17.65
TOTAL RETURN
Total investment return based
on net asset value (d) .51% 3.91% 9.07% 19.05% (10.58)% 2.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $161,893 $175,005 $193,600 $197,334 $171,670 $183,098
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .74%(e)(f) .71% .71% .79% .79% .78%
Expenses, before waivers and
reimbursements .74%(e)(f) .71% .76% .79% .79% .78%
Net investment income 2.46%(e)(f) 2.29% 2.57%(c) 2.60% 2.76% 2.50%
Portfolio turnover rate 22% 52% 60% 81% 57% 71%
See footnote summary on page 21.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS OCTOBER 26,
ENDED YEAR ENDED DECEMBER 31, 2001(g) TO
JUNE 30, 2006 --------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001(a)
--------------- ------------ ------------ ------------ ----------- ------------
Net asset value,
beginning of period $19.05 $18.83 $17.69 $15.27 $17.65 $17.56
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .21 .38 .43(c) .36 .39 .06
Net realized and unrealized
gain (loss) on investment
transactions (.13) .29 1.10 2.48 (2.27) .03
Net increase (decrease) in
net asset value from
operations .08 .67 1.53 2.84 (1.88) .09
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.44) (.45) (.39) (.42) (.31) -0-
Distributions from net
realized gain on investment
transactions (.53) -0- -0- -0- (.19) -0-
Total dividends and
Distributions (.97) (.45) (.39) (.42) (.50) -0-
Net asset value, end of period $18.16 $19.05 $18.83 $17.69 $15.27 $17.65
TOTAL RETURN
Total investment return based
on net asset value (d) .40% 3.61% 8.79% 18.78% (10.80)% .51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $42,525 $45,493 $45,047 $23,417 $3,302 $1,570
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .99%(e)(f) .96% .96% 1.05% 1.05% 1.00%(f)
Expenses, before waivers and
reimbursements .99%(e)(f) .96% 1.01% 1.05% 1.05% 1.00%(f)
Net investment income 2.21%(e)(f) 2.04% 2.35%(c) 2.29% 2.51% 1.80%(f)
Portfolio turnover rate 22% 52% 60% 81% 57% 71%
(a) As required, effective January 1, 2001, the Portfolio has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities. For the year ended
December 31, 2001, the effect of this change to Class A and B shares was to
decrease net investment income per share by $.02 and $.02, respectively,
increase net realized and unrealized gain (loss) on investments per share by
$.02 and $.02, respectively, and decrease the ratio of net investment income to
average net assets from 2.61% to 2.50% for Class A and from 2.41% to 1.80% for
Class B.
(b) Based on average shares outstanding.
(c) Net of expenses waived or reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
(g) Commencement of distribution.
21
BALANCED SHARES PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Balanced Shares Portfolio (the "Fund")(2), prepared by Philip
L. Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplate eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(3)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Balanced 55 bp on 1st $2.5 billion Balanced Shares Portfolio
45 bp on next $2.5 billion
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Balanced Shares Portfolio $69,000 0.03%
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Balanced Shares Portfolio Class A 0.76% December 31
Class B 1.01%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Prior to February 1, 2006, the Fund was known as AllianceBernstein
Balanced Shares Portfolio.
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(4)
- -------------------------------------------------------------------------------
Equity Blend 0.80%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Balanced Shares Portfolio 0.550 0.560 5/11
(4) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
23
BALANCED SHARES PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(8) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Balanced Shares
Portfolio 0.710 0.705 20/35 0.656 8/11
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Balanced Shares Portfolio $92,987
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Balanced Shares Portfolio $24,973
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
Although the Fund did not effect any brokerage transaction and pay commissions
to the Adviser's affiliate, Sanford C. Bernstein & Co. LLC, and/or its U.K.
based affiliate, Sanford C. Bernstein Ltd., (collectively "SCB"), during the
Fund's recent fiscal year, the potential for such events exist. The Adviser
represented that SCB's profitability from any business conducted with the Fund
would be comparable to the profitability of SCB's dealings with other similar
third party clients. In the ordinary course of business, SCB receives and pays
liquidity rebates from electronic communications networks ("ECNs") derived from
trading for its clients. These credits and charges are not being passed on to
any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(10) relative to its Lipper Performance Group(11) and
Lipper Performance Universe(12) for the period ended September 30, 2005.
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
25
BALANCED SHARES PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
BALANCED SHARES PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 9/11 28/36
3 year 7/11 22/36
5 year 2/11 6/32
10 year 2/10 4/29
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
BALANCED SHARES
PORTFOLIO 8.08 11.72 4.52 9.52 9.28
Lehman Brothers
Aggregate Bond Index 2.80 3.96 6.62 6.55 6.69
S&P 500 Index 12.25 16.71 -1.49 9.49 10.52
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
26
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- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN INTERNATIONAL VALUE PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
INTERNATIONAL VALUE PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
INTERNATIONAL VALUE PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ----------------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,139.39 $4.56 0.86%
Hypothetical (5% return before expenses) $1,000 $1,020.53 $4.31 0.86%
CLASS B
Actual $1,000 $1,138.12 $5.94 1.12%
Hypothetical (5% return before expenses) $1,000 $1,019.24 $5.61 1.12%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
INTERNATIONAL VALUE PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
ING Groep N.V. $ 49,742,134 3.7%
Renault, SA 42,772,556 3.2
Sumitomo Mitsui Financial Group, Inc. 36,068,956 2.7
JFE Holdings, Inc. 34,441,614 2.6
ORIX Corp. 34,300,746 2.5
Continental AG 34,135,158 2.5
British American Tobacco Plc 33,510,991 2.5
Canon, Inc. 33,294,469 2.5
Royal Bank of Scotland Group Plc 31,804,257 2.4
Vodafone Group Plc 31,297,472 2.3
-------------- -----
$ 361,368,353 26.9%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Financial $ 435,970,959 32.4%
Capital Equipment 174,143,209 13.0
Energy 150,210,771 11.2
Industrial Commodities 114,378,270 8.5
Consumer Staples 86,629,875 6.4
Technology/Electronics 85,998,365 6.4
Utilities 65,932,220 4.9
Medical 51,883,111 3.9
Telecommunications 49,727,470 3.7
Construction & Housing 39,640,388 2.9
Transportation 35,625,114 2.6
Consumer Cyclicals 3,427,985 0.3
-------------- -----
Total Investments* 1,293,567,737 96.2
Cash and receivables, net of liabilities 50,930,909 3.8
-------------- -----
Net Assets $1,344,498,646 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
INTERNATIONAL VALUE PORTFOLIO
COUNTRY DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COUNTRY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
United Kingdom $ 277,593,839 20.6%
Japan 258,406,364 19.2
France 232,620,904 17.3
Germany 134,615,391 10.0
Netherlands 49,742,134 3.7
Korea 45,677,034 3.4
Spain 44,597,318 3.3
Taiwan 35,155,184 2.6
Italy 33,283,002 2.5
China 29,684,103 2.2
Israel 26,761,479 2.0
Switzerland 26,250,185 2.0
Belgium 23,935,628 1.8
Brazil 21,077,760 1.6
South Africa 13,785,225 1.0
Canada 13,418,834 1.0
Other* 26,963,353 2.0
-------------- -----
Total Investments** 1,293,567,737 96.2
Cash and receivables, net of liabilities 50,930,909 3.8
-------------- -----
Net Assets $1,344,498,646 100.0%
* The Portfolio's country breakdown is expressed as a percentage of net
assets and may vary over time. "Other" represents less than 1% weightings in
the following countries: Hong Kong, Hungary, Singapore and Sweden.
** Excludes short-term investments.
3
INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-96.2%
FINANCIAL-32.4%
BANKING-20.1%
Bank Hapoalim BM 990,700 $ 4,330,870
Bank Leumi Le-Israel 372,300 1,354,526
Barclays Plc 2,241,200 25,406,953
BNP Paribas, SA 281,420 26,910,577
Credit Agricole, SA 570,040 21,633,024
Credit Suisse Group 470,500 26,250,185
Fortis 590,100 20,091,105
HBOS Plc 1,565,310 27,164,544
Kookmin Bank 135,800 11,188,846
Royal Bank of Scotland Group Plc 968,900 31,804,257
Societe Generale 169,920 24,948,715
Standard Bank Group Ltd. 1,289,800 13,785,225
Sumitomo Mitsui Financial Group, Inc. 3,406 36,068,956
--------------
270,937,783
FINANCIAL SERVICES-2.6%
ORIX Corp. 140,570 34,300,746
INSURANCE-9.7%
Assurance Generales de France 216,000 25,462,815
Aviva Plc 1,725,597 24,422,065
Friends Provident Plc 2,061,380 6,816,273
ING Groep N.V. 1,267,071 49,742,134
Muenchener Rueckversicherungs-Gesellschaft AG 178,000 24,289,143
--------------
130,732,430
--------------
435,970,959
CAPITAL EQUIPMENT-13.0%
AEROSPACE & DEFENSE-2.7%
BAE Systems Plc 1,793,000 12,249,051
European Aeronautic Defence and Space Co. NV 807,240 23,156,690
--------------
35,405,741
AUTOMOBILES-7.7%
Continental AG 334,100 34,135,158
Renault, SA 398,600 42,772,556
Toyota Motor Corp. 510,900 26,701,823
--------------
103,609,537
MACHINERY & ENGINEERING-2.6%
MAN AG 202,700 14,670,777
Sumitomo Heavy Industries Ltd. 2,214,000 20,457,154
--------------
35,127,931
--------------
174,143,209
ENERGY-11.2%
ENERGY SOURCES-11.2%
BP Plc 1,169,600 13,561,254
Canadian Natural Resources Ltd. 242,700 13,418,834
China Petroleum & Chemical Corp. 18,094,000 10,374,724
Eni S.p.A 732,300 21,509,836
MOL Hungarian Oil and Gas Plc 31,600 3,248,736
MOL Hungarian Oil and Gas Plc (ADR) 34,630 3,556,442
PetroChina Co., Ltd. 8,704,000 9,302,139
Petroleo Brasileiro, SA (ADR) (a) 264,000 21,077,760
Repsol YPF, SA 825,500 23,640,619
Total, SA 464,600 30,520,427
--------------
150,210,771
INDUSTRIAL COMMODITIES-8.5%
CHEMICAL-1.2%
Arkema (a) 9,820 383,214
Mitsui Chemicals, Inc. 2,457,000 16,057,313
--------------
16,440,527
FOREST & PAPER-0.4%
Svenska Cellulosa AB Cl. B 114,800 4,739,613
METAL - NONFERROUS-1.8%
Xstrata Plc 636,270 24,217,937
METAL - STEEL-5.1%
Arcelor 262,460 12,706,469
JFE Holdings, Inc. 811,200 34,441,614
POSCO 81,300 21,832,110
--------------
68,980,193
--------------
114,378,270
CONSUMER STAPLES-6.4%
BEVERAGES & TOBACCO-4.6%
British American Tobacco Plc 1,331,000 33,510,991
Japan Tobacco, Inc. 7,827 28,584,124
--------------
62,095,115
FOOD & HOUSEHOLD PRODUCTS-1.8%
Delhaize Group 55,489 3,844,523
J Sainsbury Plc 3,135,500 19,364,509
Tate & Lyle Plc 118,500 1,325,728
--------------
24,534,760
--------------
86,629,875
TECHNOLOGY/ELECTRONICS-6.4%
DATA PROCESSING-2.5%
Canon, Inc. 679,350 33,294,469
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS-0.7%
Compal Electronics, Inc. (GDR) 2,102,244 $ 10,031,698
ELECTRONIC COMPONENTS & INSTRUMENTS-3.2%
Flextronics International Ltd. (a) 460,700 4,892,634
Samsung Electronics Co., Ltd. 19,940 12,656,078
Taiwan Semiconductor Manufacturing Co.,
Ltd. (ADR) 1,456,432 13,370,046
United Microelectronics Corp. 19,790,000 11,753,440
--------------
42,672,198
--------------
85,998,365
UTILITIES-4.9%
ELECTRIC & GAS-4.9%
E.ON AG 237,800 27,329,245
Endesa, SA 603,159 20,956,699
RWE AG 212,470 17,646,276
--------------
65,932,220
MEDICAL-3.9%
HEALTH & PERSONAL CARE-3.9%
AstraZeneca Plc 336,200 20,216,165
GlaxoSmithKline Plc 270,200 7,540,529
Sanofi-Aventis 247,627 24,126,417
--------------
51,883,111
TELECOMMUNICATIONS-3.7%
TELECOMMUNICATIONS-3.7%
China Netcom Group Corp. Hong Kong Ltd. 5,706,500 10,007,240
Nippon Telegraph & Telephone Corp. 1,350 6,591,486
Singapore Telecommunications Ltd. 1,140,145 1,831,272
Vodafone Group Plc 14,705,000 31,297,472
--------------
49,727,470
CONSTRUCTION & HOUSING-2.9%
BUILDING MATERIALS-0.9%
Buzzi Unicem SpA 513,712 11,773,166
CONSTRUCTION & HOUSING-1.4%
George Wimpey Plc 336,800 2,828,357
Leopalace21 Corp. 319,200 10,996,028
Persimmon Plc 79,131 1,803,440
Taylor Woodrow Plc 574,800 3,544,741
--------------
19,172,566
REAL ESTATE-0.6%
Sino Land Co., Ltd. 5,435,928 8,694,656
--------------
39,640,388
TRANSPORTATION-2.6%
TRANSPORTATION - AIRLINES-1.2%
Deutsche Lufthansa AG 898,200 16,544,792
TRANSPORTATION - SHIPPING-1.4%
Mitsui OSK Lines Ltd. 2,802,000 19,080,322
--------------
35,625,114
CONSUMER CYCLICALS-0.3%
LEISURE & TOURISM-0.3%
Whitbread Plc 299,540 3,427,985
Total Common Stocks
(cost $1,053,562,158) 1,293,567,737
SHORT-TERM INVESTMENT-3.9%
TIME DEPOSIT-3.9%
The Bank of New York
4.25%, 7/03/06
(cost $52,109,000) $52,109 52,109,000
TOTAL INVESTMENTS-100.1%
(cost $1,105,671,158) 1,345,676,737
Other assets less liabilities-(0.1%) (1,178,091)
NET ASSETS-100% $1,344,498,646
5
INTERNATIONAL VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
FINANCIAL FUTURES CONTRACTS PURCHASED (SEE NOTE D)
NUMBER OF EXPIRATION ORIGINAL VALUE AT UNREALIZED
TYPE CONTRACTS MONTH VALUE JUNE 30, 2006 APPRECIATION
- -------------------------------------------------------------------------------
EURO STOXX September
50 Index 376 2006 $16,892,081 $17,611,399 $719,318
(a) Non-income producing security.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See Notes to Financial Statements.
6
INTERNATIONAL VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value
(cost $1,105,671,158) $1,345,676,737
Cash 387
Foreign cash, at value (cost $10,219,071) 10,451,300(a)
Receivable for investment securities sold and foreign
currency contracts 19,662,246
Dividends and interest receivable 2,972,442
Receivable for capital stock sold 2,200,116
Receivable for variation margin on futures contracts 702,147
Total assets 1,381,665,375
LIABILITIES
Payable for investment securities purchased and
foreign currency contracts 35,259,356
Advisory fee payable 832,188
Payable for capital stock redeemed 487,919
Distribution fee payable 260,438
Administrative fee payable 19,607
Transfer agent fee payable 131
Accrued expenses 307,090
Total liabilities 37,166,729
NET ASSETS $1,344,498,646
COMPOSITION OF NET ASSETS
Capital stock, at par $ 64,460
Additional paid-in capital 1,070,555,875
Undistributed net investment income 5,341,901
Accumulated net realized gain on investment and foreign
currency transactions 26,465,134
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 242,071,276
$1,344,498,646
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 83,601,463 3,979,585 $21.01
B $1,260,897,183 60,480,590 $20.85
(a) An amount equivalent to U.S. $1,274,446 has been segregated as collateral
for the financial futures contracts outstanding at June 30, 2006.
See Notes to Financial Statements.
7
INTERNATIONAL VALUE PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $2,644,217) $ 22,119,231
Interest 1,027,352
Total investment income 23,146,583
EXPENSES
Advisory fee 4,340,794
Distribution fee--Class B 1,356,359
Transfer agency--Class A 140
Transfer agency--Class B 2,132
Custodian 431,153
Printing 203,829
Administrative 39,000
Audit 20,248
Legal 18,043
Directors' fees 630
Miscellaneous 17,259
Total expenses 6,429,587
Net investment income 16,716,996
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 29,470,356
Futures (214,746)
Foreign currency transactions (2,659,951)
Net change in unrealized appreciation/depreciation of:
Investments 86,377,344
Futures 543,050
Foreign currency denominated assets and liabilities 1,376,921
Net gain on investment and foreign currency transactions 114,892,974
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 131,609,970
See Notes to Financial Statements.
8
INTERNATIONAL VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 16,716,996 $ 6,200,829
Net realized gain on investment and
foreign currency transactions 26,595,659 23,534,316
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 88,297,315 77,294,249
Net increase in net assets from
operations 131,609,970 107,029,394
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (1,113,605) (300,646)
Class B (15,878,596) (2,221,447)
Net realized gain on investment and
foreign currency transactions
Class A (1,462,755) (817,290)
Class B (22,570,291) (7,232,618)
CAPITAL STOCK TRANSACTIONS
Net increase 356,650,002 469,268,777
Total increase 447,234,725 565,726,170
NET ASSETS
Beginning of period 897,263,921 331,537,751
End of period (including undistributed
net investment income of $5,341,901
and $5,617,106, respectively) $1,344,498,646 $ 897,263,921
See Notes to Financial Statements.
9
INTERNATIONAL VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein International Value Portfolio (the "Portfolio") is a
series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund").
The Portfolio's investment objective is to seek long-term growth of capital.
The Portfolio commenced operations on May 10, 2001. The Portfolio is
diversified as defined under the Investment Company Act of 1940. The Fund was
incorporated in the State of Maryland on November 17, 1987, as an open-end
series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly. The
Adviser has agreed to waive its fees and bear certain expenses to the extent
necessary to limit total operating expenses on an annual basis to 1.20% and
1.45% of the daily average net assets for Class A and Class B shares,
respectively. For the six months ended June 30, 2006, there were no expenses
waived by the Adviser.
11
INTERNATIONAL VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $1,241,260, of which $10,444 and $0, respectively,
was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 446,231,825 $ 118,131,132
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding futures and
foreign currency transactions) are as follows:
Gross unrealized appreciation $ 255,887,940
Gross unrealized depreciation (15,882,361)
Net unrealized appreciation $ 240,005,579
1 . FINANCIAL FUTURES CONTRACTS
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse effects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments and the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities hedged or used for cover.
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
At the time the Portfolio enters into a futures contract, the Portfolio
deposits and maintains as collateral an initial margin with the broker, as
required by the exchange on which the transaction is effected. 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. 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.
2. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
3. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
13
INTERNATIONAL VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,190,315 528,832 $ 25,119,934 $ 9,037,927
Shares issued
in reinvestment
of dividends and
distributions 125,676 69,653 2,576,360 1,117,935
Shares redeemed (309,810) (444,976) (6,583,320) (7,683,497)
Net increase 1,006,181 153,509 $ 21,112,974 $ 2,472,365
CLASS B
Shares sold 15,247,857 27,316,701 $ 319,598,170 $ 468,166,930
Shares issued
in reinvestment
of dividends and
distributions 1,889,380 592,360 38,448,887 9,454,065
Shares redeemed (1,065,008) (628,505) (22,510,029) (10,824,583)
Net increase 16,072,229 27,280,556 $ 335,537,028 $ 466,796,412
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 5,167,063 $ 1,328,206
Net long-term capital gains 5,404,938 -0-
Total distributions paid $ 10,572,001 $ 1,328,206
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 21,844,176
Undistributed long-term capital gains 18,982,242
Accumulated capital and other losses (320,905)(a)
Unrealized appreciation/(depreciation) 142,788,075(b)
Total accumulated earnings/(deficit) $ 183,293,588
(a) Net foreign currency losses and passive foreign investment company losses
incurred after October 31, and within the taxable year are deemed to arise on
the first business day of the Portfolio's next taxable year. For the year ended
December 31, 2005, the Portfolio deferred until January 1, 2006, post-October
foreign currency losses of $2,951, and post-October passive foreign investment
company losses of $317,954.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales, the tax treatment of passive foreign investment
companies, and the recognition for tax purposes of gains/losses on certain
derivative instruments.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers
15
INTERNATIONAL VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
of the Adviser ("Alliance defendants"), and certain other defendants not
affiliated with the Adviser, as well as unnamed Doe defendants. The Hindo
Complaint was filed in the United States District Court for the Southern
District of New York by alleged shareholders of two of the AllianceBernstein
Funds. The Hindo Complaint alleges that certain of the Alliance defendants
failed to disclose that they improperly allowed certain hedge funds and other
unidentified parties to engage in "late trading" and "market timing" of
AllianceBernstein Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Sections 206
and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of
compensatory damages and rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
17
INTERNATIONAL VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED MAY 10, 2001(a)
JUNE 30, YEAR ENDED DECEMBER 31, TO
2006 --------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ --------- -------------
Net asset value,
beginning of period $19.07 $16.70 $13.45 $9.35 $9.87 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (b) .33 .26(c) .20(c) .13(c) .13(c) .04(c)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 2.31 2.49 3.16 4.01 (.64) (.17)
Net increase (decrease) in
net asset value from
operations 2.64 2.75 3.36 4.14 (.51) (.13)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.30) (.10) (.08) (.04) (.01) -0-
Distributions from net realized
gain on investment foreign
currency transactions (.40) (.28) (.03) -0- -0- -0-
Total dividends and
Distributions (.70) (.38) (.11) (.04) (.01) -0-
Net asset value, end of period $21.01 $19.07 $16.70 $13.45 $9.35 $9.87
TOTAL RETURN
Total investment return based
on net asset value (d) 13.94% 16.92% 25.12% 44.36% (5.15)% (1.30)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $83,602 $56,692 $47,095 $31,628 $14,391 $3,913
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .86%(e)(f) .86% .95% 1.20% 1.17% .95%(f)
Expenses, before waivers and
reimbursements .86%(e)(f) .87% 1.13% 1.49% 2.20% 8.41%(f)
Net investment income 3.10%(e)(f) 1.54%(c) 1.42%(c) 1.16%(c) 1.30%(c) .59%(c)(f)
Portfolio turnover rate 11% 18% 23% 14% 19% 22%
See footnote summary on page 19.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS AUGUST 15,
ENDED 2001(g)
JUNE 30, YEAR ENDED DECEMBER 31, TO
2006 ---------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ----------- ------------ ------------- ---------- -------------
Net asset value,
beginning of period $18.93 $16.61 $13.39 $9.33 $9.87 $10.25
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (b) .30 .19(c) .15(c) .08(c) .08(c) .01(c)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 2.30 2.50 3.16 4.01 (.61) (.39)
Net increase (decrease) in
net asset value from
operations 2.60 2.69 3.31 4.09 (.53) (.38)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.28) (.09) (.06) (.03) (.01) -0-
Distributions from net
realized gain on investment
foreign currency transactions (.40) (.28) (.03) -0- -0- -0-
Total dividends and
Distributions (.68) (.37) (.09) (.03) (.01) -0-
Net asset value, end of period $20.85 $18.93 $16.61 $13.39 $9.33 $9.87
TOTAL RETURN
Total investment return based
on net asset value (d) 13.81% 16.58% 24.86% 43.95% (5.36)% (3.71)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,260,897 $840,572 $284,443 $112,336 $26,133 $1,828
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.12%(e)(f) 1.11% 1.20% 1.45% 1.44% 1.20%(f)
Expenses, before waivers and
reimbursements 1.12%(e)(f) 1.12% 1.38% 1.74% 2.47% 9.31%(f)
Net investment income 2.89%(e)(f) 1.08%(c) 1.07%(c) .38%(c) .86%(c) .17%(c)(f)
Portfolio turnover rate 11% 18% 23% 14% 19% 22%
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses reimbursed or waived by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
(g) Commencement of distribution.
19
INTERNATIONAL VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein International Value Portfolio (the "Fund"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
International 75 bp on 1st $2.5 billion International Value Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
International Value Portfolio(3) $69,000 0.03%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
(3) The expense reimbursement has been waived by the Adviser.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's most recent fiscal year. The waiver is terminable by the Adviser on
May 1st of each year upon at least 60 days written notice. It should be noted
that the Fund was operating below its expense cap in the latest fiscal year;
accordingly, the expense limitation undertaking of that Fund was of no effect.
The gross expense ratios of the Fund during the most recently completed fiscal
year are also listed below.
EXPENSE CAP PURSUANT TO
EXPENSE LIMITATION GROSS EXPENSE FISCAL
FUND UNDERTAKING RATIO YEAR END
- -------------------------------------------------------------------------------
International Value Class A 1.20% 1.13% December 31
Portfolio Class B 1.45% 1.38%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
International Value $714.8 International Strategic 0.528%
Portfolio Value Schedule
90 bp on 1st $25 m
70 bp on next $25 m
60 bp on next $50 m
50 bp on the balance
MINIMUM ACCOUNT SIZE $25 M
21
INTERNATIONAL VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
FUND ACITM MUTUAL FUND(4) FEE
- -------------------------------------------------------------------------------
International Value Alliance International Value 0.30%
Portfolio TRB (Sumitomo)(5)
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
International Value Client # 1 0.65% on first $75 million
Portfolio 0.50% on next $25 million
0.40% on next $200 million
0.35% on next $450 million
0.30% thereafter
Client # 2(6) 0.60% on first $1 billion
0.55% on next $500 million
0.50% on next $500 million
0.45% on next $500 million
0.40% thereafter
Client # 3 Base fee of
0.22% on first $1 billion
0.18% on next $1.5 billion
0.16% thereafter
+/- Performance Fee(7)
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser. In addition, to the extent that
certain of these sub-advisory relationships are with affiliates of the Adviser,
the fee schedules may not reflect arms-length bargaining or negotiations.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers.
(4) The name in parenthesis is the distributor of the fund.
(5) The ACITM fund is not a retail fund.
(6) This is the fee schedule of a fund managed by an affiliate of the Adviser.
(7) The performance fee is calculated by multiplying the Base Fee during the
period by an adjustment factor that considers the excess or under performance
of the fund versus its benchmark, the Morgan Stanley Capital International All
World Index Excluding US (ACWI ex US) over a 60 month rolling period. The
fund's annualized effective advisory fee rate over the most recent four
quarterly payments, including base fee plus performance fee, is 0.23%.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Lipper's analysis included the Fund's ranking with respect to the proposed
management fee relative to the Lipper group median at the approximate current
asset level of the Fund.(8)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
International Value Portfolio 0.750 0.852 2/10
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(9) and Lipper Expense Universe(10). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(11) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
International Value
Portfolio 0.958 0.958 7/13 0.980 5/10
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund increased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
(8) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the fee waiver or expense reimbursement that effectively
reduce the contractual fee rates. In addition, the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(9) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(10) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(11) Most recent fiscal year end Class A share total expense ratio.
23
INTERNATIONAL VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
International Value Portfolio $435,830
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
International Value Portfolio $372,705
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(12) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
(12) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1 and 3 year performance rankings
of the Fund(13) relative to its Lipper Performance Group(14) and Lipper
Performance Universe(15) for the period ended September 30, 2005.
INTERNATIONAL VALUE PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 2/10 2/12
3 year 1/9 1/10
Set forth below are the 1, 3 year and since inception performance returns of
the Fund (in bold)(16) versus its benchmark(17).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
INTERNATIONAL VALUE PORTFOLIO 26.97 30.79 15.80
MSCI EAFE Index (Net) 25.79 24.61 7.14
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(13) The performance rankings are for the Class A shares of the Fund.
(14) The Lipper Performance Group is identical to the Lipper Expense Group.
(15) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(16) The performance returns are for the Class A shares of the Fund.
(17) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
25
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
> ARE NOT FDIC INSURED
> MAY LOSE VALUE
> ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEIN(R) AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE
MARKS USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
REAL ESTATE INVESTMENT PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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.
REAL ESTATE BEGINNING ENDING EXPENSES ANNUALIZED
INVESTMENT ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 PERIOD* RATIO*
- -------------------------------------------------------------------------------
CLASS A
Actual $1,000 $1,141.97 $4.51 0.85%
Hypothetical
(5% return
before expenses) $1,000 $1,020.58 $4.26 0.85%
CLASS B
Actual $1,000 $1,139.99 $5.84 1.10%
Hypothetical
(5% return
before expenses) $1,000 $1,019.34 $5.51 1.10%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
REAL ESTATE INVESTMENT PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Simon Property Group, Inc. $ 6,344,910 6.4%
ProLogis 5,707,140 5.8
Public Storage, Inc. 4,637,490 4.7
AvalonBay Communities, Inc. 4,612,854 4.7
Vornado Realty Trust 4,165,385 4.2
Equity Residential 4,025,700 4.1
Boston Properties, Inc. 4,004,720 4.0
Camden Property Trust 3,471,560 3.5
General Growth Properties, Inc. 3,460,608 3.5
Alexandria Real Estate Equities, Inc. 3,458,520 3.5
- -------------------------------------------------------------------------------
$ 43,888,887 44.4%
INDUSTRY DIVERSIFICATION
June 30, 2006 (unaudited)
PERCENT OF
INDUSTRY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Office $ 19,903,466 20.1%
Apartments 19,035,946 19.2
Regional Malls 11,993,958 12.1
Lodging 11,861,564 12.0
Shopping Centers 10,800,585 10.9
Diversified 7,603,222 7.7
Industrial 7,483,203 7.6
Storage 4,637,490 4.7
Health Care 1,965,040 2.0
Total Investments* 95,284,474 96.3
Cash and receivables,
net of liabilities 3,673,094 3.7
Net Assets $ 98,957,568 100.0%
* Excludes short-term investments.
Please Note: The industry classifications presented herein are based on
the industry categorization methodology of the Adviser.
2
REAL ESTATE INVESTMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-96.3%
REAL ESTATE INVESTMENT TRUSTS-96.3%
OFFICE-20.1%
Alexandria Real Estate Equities, Inc. 39,000 $ 3,458,520
BioMed Realty Trust, Inc. 17,600 526,944
Boston Properties, Inc. 44,300 4,004,720
Brookfield Properties Corp. 46,700 1,502,339
Corporate Office Properties Trust 77,900 3,278,032
Equity Office Properties Trust 39,400 1,438,494
Maguire Properties, Inc. 81,400 2,862,838
Reckson Associates Realty Corp. 17,900 740,702
SL Green Realty Corp. 19,100 2,090,877
------------
19,903,466
APARTMENTS-19.2%
Archstone-Smith Trust 53,000 2,696,110
AvalonBay Communities, Inc. 41,700 4,612,854
Camden Property Trust 47,200 3,471,560
Equity Residential 90,000 4,025,700
Essex Property Trust, Inc. 11,500 1,284,090
Mid-America Apartment Communities, Inc. 34,900 1,945,675
United Dominion Realty Trust, Inc. 35,700 999,957
------------
19,035,946
REGIONAL MALLS-12.1%
General Growth Properties, Inc. 76,800 3,460,608
Simon Property Group, Inc. 76,500 6,344,910
Taubman Centers, Inc. 36,000 1,472,400
The Macerich Co. 10,200 716,040
------------
11,993,958
LODGING-12.0%
Equity Inns, Inc. 77,900 1,290,024
FelCor Lodging Trust, Inc. 76,500 1,663,110
Host Marriott Corp. 149,940 3,279,188
LaSalle Hotel Properties 22,500 1,041,750
Starwood Hotels & Resorts
Worldwide, Inc. 7,700 464,618
Strategic Hotel Capital, Inc. 91,600 1,899,784
Sunstone-Hotel Investors, Inc. 76,500 2,223,090
------------
11,861,564
SHOPPING CENTERS-10.9%
Developers Diversified Realty Corp. 33,100 1,727,158
Federal Realty Investment Trust 29,100 2,037,000
Kimco Realty Corp. 92,800 3,386,272
Regency Centers Corp. 39,200 2,436,280
Tanger Factory Outlet Centers, Inc. 37,500 1,213,875
------------
10,800,585
DIVERSIFIED-7.7%
Digital Realty Trust, Inc. 97,800 2,414,682
Forest City Enterprises, Inc. 20,500 1,023,155
Vornado Realty Trust 42,700 4,165,385
------------
7,603,222
INDUSTRIAL-7.6%
AMB Property Corp. 19,400 980,670
First Potomac Realty Trust 26,700 795,393
ProLogis 109,500 5,707,140
------------
7,483,203
STORAGE-4.7%
Public Storage, Inc. 61,100 4,637,490
HEALTH CARE-2.0%
Ventas, Inc. 58,000 1,965,040
Total Common Stocks
(cost $57,397,846) 95,284,474
SHORT-TERM INVESTMENT-2.1%
TIME DEPOSIT-2.1%
The Bank of New York
4.25%, 7/03/06
(cost $2,046,000) $ 2,046 2,046,000
TOTAL INVESTMENTS-98.4%
(cost $59,443,846) 97,330,474
Other assets less liabilities-1.6% 1,627,094
NET ASSETS-100% $ 98,957,568
See Notes to Financial Statements.
3
REAL ESTATE INVESTMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $59,443,846) $ 97,330,474
Cash 8,590
Receivable for investment securities sold 1,832,114
Dividends and interest receivable 397,510
Receivable for capital stock sold 16,116
Total assets 99,584,804
LIABILITIES
Payable for investment securities purchased 381,688
Payable for capital stock redeemed 90,116
Advisory fee payable 46,175
Administrative fee payable 19,607
Distribution fee payable 6,064
Transfer agent fee payable 123
Accrued expenses 83,463
Total liabilities 627,236
NET ASSETS $ 98,957,568
COMPOSITION OF NET ASSETS
Capital stock, at par $ 5,134
Additional paid-in capital 51,923,417
Undistributed net investment income 1,262,425
Accumulated net realized gain on
investment transactions 7,879,964
Net unrealized appreciation of investments 37,886,628
$ 98,957,568
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $70,379,538 3,651,158 $19.28
B $28,578,030 1,482,685 $19.27
See Notes to Financial Statements.
4
REAL ESTATE INVESTMENT PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $3,491) $ 1,692,481
Interest 35,252
Total investment income 1,727,733
EXPENSES
Advisory fee 270,323
Distribution fee--Class B 33,982
Transfer agency--Class A 814
Transfer agency--Class B 315
Custodian 58,131
Administrative 39,000
Printing 25,827
Audit 21,133
Legal 2,793
Directors' fees 621
Miscellaneous 3,720
Total expenses 456,659
Net investment income 1,271,074
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 7,976,700
Net change in unrealized appreciation/depreciation
of investments 3,434,484
Net gain on investment transactions 11,411,184
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 12,682,258
See Notes to Financial Statements.
5
REAL ESTATE INVESTMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,271,074 $ 1,953,189
Net realized gain on investment transactions 7,976,700 25,044,217
Net change in unrealized appreciation/
depreciation of investments 3,434,484 (19,870,542)
Net increase in net assets from operations 12,682,258 7,126,864
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A (1,453,595) (2,199,640)
Class B (500,621) (550,085)
Net realized gain on investment transactions
Class A (9,286,857) (7,012,167)
Class B (3,779,939) (2,183,116)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 9,259,868 (59,043,161)
Total increase (decrease) 6,921,114 (63,861,305)
NET ASSETS
Beginning of period 92,036,454 155,897,759
End of period (including undistributed net
investment income of $1,262,425 and
$1,945,567, respectively) $ 98,957,568 $ 92,036,454
See Notes to Financial Statements.
6
REAL ESTATE INVESTMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Real Estate Investment Portfolio (the "Portfolio") is a
series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund").
The Portfolio's investment objective is total return from long-term growth of
capital and income. Prior to February 1, 2006, the Portfolio's objective was to
seek total return from long-term growth of capital and income principally
through investing in equity securities of companies that are primarily engaged
in or related to the real estate industry. The Portfolio is diversified as
defined under the Investment Company Act of 1940. The Fund was incorporated in
the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
7
REAL ESTATE INVESTMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .90% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
8
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006 amounted to $18,114, none of which was paid to Sanford C.
Bernstein & Co. LLC, and Sanford C. Bernstein Limited, affiliates of the
Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
Investment securities (excluding
U. S. government securities) $ 22,707,291 $ 28,401,131
U.S. GOVERNMENT SECURITIES -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $ 37,988,345
Gross unrealized depreciation (101,717)
Net unrealized appreciation $ 37,886,628
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
9
REAL ESTATE INVESTMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 222,141 482,355 $ 4,837,459 $ 9,469,405
Shares issued in
reinvestment of
dividends and
distributions 569,785 503,377 10,740,452 9,211,808
Shares redeemed (502,777) (1,904,173) (10,856,292) (37,151,995)
Net increase
(decrease) 289,149 (918,441) $ 4,721,619 $ (18,470,782)
CLASS B
Shares sold 168,862 492,284 $ 3,700,640 $ 9,499,398
Shares issued in
reinvestment of
dividends and
distributions 227,085 149,437 4,280,560 2,733,201
Shares redeemed (161,076) (2,678,456) (3,442,951) (52,804,978)
Net increase
(decrease) 234,871 (2,036,735) $ 4,538,249 $ (40,572,379)
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Concentration of Risk--Although the Portfolio does not invest directly in real
estate, it invests primarily in Real Estate Equity Securities and has a policy
of concentration of its investments in the real estate industry. Therefore, an
investment in the Portfolio is subject to certain risks associated with the
direct ownership of real estate and with the real estate industry in general.
To the extent that assets underlying the Portfolio's investments are
concentrated geographically, by property type or in certain other respects, the
Portfolio may be subject to additional risks.
In addition, investing in Real Estate Investment Trusts ("REITs") involves
certain unique risks in addition to those risks associated with investing in
the real estate industry in general. REITs are dependent upon management
skills, are not diversified, and are subject to heavy cash flow dependency,
default by borrowers and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax-free pass-through of income under
the Code and failing to maintain their exemptions from registration under the
1940 Act. REITs (especially mortgage REITs) also are subject to interest rate
risks.
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 of losses pursuant to these indemnification provisions
and expects the risk of loss thereunder to be remote.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 6,167,554 $ 2,881,552
Net long-term capital gains 5,777,454 -0-
Total taxable distributions 11,945,008 2,881,552
Total distributions paid $ 11,945,008 $ 2,881,552
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 2,981,167
Undistributed long term capital gain 12,023,922
Unrealized appreciation/(depreciation) 34,362,682(a)
Total accumulated earnings/(deficit) $ 49,367,771
(a) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
11
REAL ESTATE INVESTMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
include substantially identical factual allegations, which appear to be based
in large part on the SEC Order and the NYAG Order. The claims in the mutual
fund derivative consolidated amended complaint are generally based on the
theory that all fund advisory agreements, distribution agreements and 12b-1
plans between the Adviser and the AllianceBernstein Funds should be
invalidated, regardless of whether market timing occurred in each individual
fund, because each was approved by fund trustees on the basis of materially
misleading information with respect to the level of market timing permitted in
funds managed by the Adviser. The claims asserted in the other three
consolidated amended complaints are similar to those that the respective
plaintiffs asserted in their previous federal lawsuits. All of these lawsuits
seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
13
REAL ESTATE INVESTMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
14
REAL ESTATE INVESTMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ---------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net assets value, beginning of period $19.98 $20.66 $15.62 $11.52 $11.50 $10.75
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .28 .32 .39(b) .46 .44(b) .47(b)
Net realized and unrealized gain (loss)
on investment transactions 2.48 1.84 5.05 3.99 (.12) .67
Net increase in net asset value
from operations 2.76 2.16 5.44 4.45 .32 1.14
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.47) (.68) (.40) (.35) (.30) (.39)
Distributions from net realized gain
on investment transactions (2.99) (2.16) -0- -0- -0- -0-
Total dividends and distributions (3.46) (2.84) (.40) (.35) (.30) (.39)
Net asset value, end of period $19.28 $19.98 $20.66 $15.62 $11.52 $11.50
TOTAL RETURN
Total investment return based on
net asset value (c) 14.20% 11.67% 35.63% 39.30% 2.60% 10.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $70,380 $67,161 $88,441 $68,717 $50,062 $39,417
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements .85%(d)(e) .83% .77% 1.24% 1.06% .95%
Expenses, before waivers
and reimbursements .85%(d)(e) .83% .99% 1.24% 1.29% 1.39%
Net investment income 2.66%(d)(e) 1.64% 2.26%(b) 3.50% 3.70%(b) 4.32%(b)
Portfolio turnover rate 24% 46% 35% 23% 31% 33%
See footnote summary on page 16.
15
REAL ESTATE INVESTMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
------------------------------------------------------------------------------
SIX MONTHS APRIL 24, 2001(f)
ENDED YEAR ENDED DECEMBER 31, TO
JUNE 30, 2006 -------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net assets value, beginning of period $19.94 $20.54 $15.55 $11.48 $11.49 $10.46
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .26 .38 .34(b) .43 .40(b) .31(b)
Net realized and unrealized gain (loss)
on investment transactions 2.46 1.72 5.03 3.98 (.11) 1.11
Net increase in net asset value
from operations 2.72 2.10 5.37 4.41 .29 1.42
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.40) (.54) (.38) (.34) (.30) (.39)
Distributions from net realized gain
on investment transactions (2.99) (2.16) -0- -0- -0- -0-
Total dividends and distributions (3.39) (2.70) (.38) (.34) (.30) (.39)
Net asset value, end of period $19.27 $19.94 $20.54 $15.55 $11.48 $11.49
TOTAL RETURN
Total investment return based on net
asset value (c) 14.00% 11.40% 35.28% 39.02% 2.31% 13.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $28,578 $24,875 $67,457 $43,919 $16,626 $5,603
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.10%(d)(e) 1.06% 1.02% 1.49% 1.31% 1.20%(e)
Expenses, before waivers
and reimbursements 1.10%(d)(e) 1.06% 1.24% 1.49% 1.52% 1.84%(e)
Net investment income 2.43%(d)(e) 2.11% 2.02%(b) 3.22% 3.43%(b) 4.40%(b)(e)
Portfolio turnover rate 24% 46% 35% 23% 31% 33%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
(f) Commencement of distribution.
16
REAL ESTATE INVESTMENT PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Real Estate Investment Portfolio (the "Fund"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Value 55 bp on 1st $2.5 billion Real Estate
45 bp on next $2.5 billion Investment Portfolio
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Real Estate Investment Portfolio $69,000 0.05%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
17
REAL ESTATE INVESTMENT PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Real Estate Investment Portfolio Class A 0.99% December 31
Class B 1.24%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -----------------------------------------------------------------------------
Real Estate $94.3 Domestic REIT Strategy Schedule 0.559%(3)
Investment 70 bp on 1st $25 m
Portfolio 60 bp on next $25 m
50 bp on next $25 m
negotiable on the balance
MINIMUM ACCOUNT SIZE $10m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
(3) Assumes 40 bp on the balance.
18
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE
- -------------------------------------------------------------------------------
Real Estate 0.95%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Real Estate Investment
Portfolio 0.550 0.820 1/13
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(7) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Real Estate
Investment
Portfolio 0.769 0.900 3/17 0.900 3/13
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
(4) It should be noted that "effective management fee" is calculated by
Lipper using the Fund's contractual management fee rate at a hypothetical asset
level. The hypothetical asset level is based on the combined net assets of all
classes of the Fund, rounded up to the next $25 million. Lipper's total expense
ratio information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(5) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(6) Except for asset (size) comparability and load type, Lipper uses the
same criteria for selecting a Lipper Expense Group when selecting a Lipper
Expense Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe
allows for the same adviser to be represented by more than just one fund.
(7) Most recent fiscal year end Class A share total expense ratio.
19
REAL ESTATE INVESTMENT PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund increased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12b-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Real Estate Investment Portfolio $135,416
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Real Estate Investment Portfolio $275,618
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(8) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser,
(8) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
20
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
such as investment research or technology for trading or compliance systems can
be spread across a greater asset base as the fund family increases in size. It
is also possible that as the level of services required to operate a successful
investment company has increased over time, and advisory firms have made such
investments in their business to provide improved services, there may be a
sharing of economies of scale without a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3 and 5 year performance
rankings of the Fund(9) relative to its Lipper Performance Group(10) and Lipper
Performance Universe(11) for the period ended September 30, 2005.
REAL ESTATE INVESTMENT PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 9/13 10/17
3 year 5/11 6/14
5 year 3/11 3/13
Set forth below are the 1, 3, 5 year and since inception performance returns of
the Fund (in bold)(12) versus its benchmark(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
1 3 5 SINCE
FUND YEAR YEAR YEAR INCEPTION
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT PORTFOLIO 26.57 27.05 18.83 12.55
NEREIT Equity Index 27.28 26.02 19.58 12.56
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(9) The performance rankings are for the Class A shares of the Fund.
(10) The Lipper Performance Group is identical to the Lipper Expense Group.
(11) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(12) The performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
21
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
JUNE 30, 2006
SEMI-ANNUAL REPORT
> ALLIANCEBERNSTEIN SMALL/MID CAP VALUE PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
> ARE NOT FDIC INSURED
> MAY LOSE VALUE
> ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S FORMS N-Q
ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S FORMS N-Q
MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN
WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY
BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEINR AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE MARKS
USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
SMALL/MID CAP VALUE PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
SMALL/MID CAP VALUE PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
--------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,070.18 $4.47 0.87%
Hypothetical (5% return before
expenses) $1,000 $1,020.48 $4.36 0.87%
CLASS B
Actual $1,000 $1,069.03 $5.75 1.12%
Hypothetical (5% return before
expenses) $1,000 $1,019.24 $5.61 1.12%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
SMALL/MID CAP VALUE PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- ---------------------------------------------------------------------------------------
Terex Corp. $ 6,573,419 1.8%
StanCorp Financial Group, Inc. 6,465,569 1.8
Vail Resorts, Inc. 6,273,610 1.8
Allegheny Energy, Inc. 6,268,537 1.7
Radian Group, Inc. 6,215,068 1.7
Con-way, Inc. 6,136,235 1.7
GATX Corp. 5,873,500 1.6
Office Depot, Inc. 5,814,000 1.6
Old Republic International Corp. 5,735,174 1.6
FelCor Lodging Trust, Inc. 5,686,097 1.6
----------- -----
$ 61,041,209 16.9%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
SECTOR U.S. $ VALUE PERCENT OF NET ASSETS
- ---------------------------------------------------------------------------------------
FINANCIAL $ 87,341,515 24.2%
Capital Equipment 39,393,789 10.9
Technology 36,153,532 10.0
Consumer Cyclicals 29,324,885 8.1
Services 29,062,075 8.1
Consumer Growth 28,045,989 7.8
Consumer Staples 26,706,419 7.4
Utilities 21,631,945 6.0
Industrial Resources 18,684,199 5.2
Energy 18,594,089 5.2
Commodities 10,730,364 3.0
Non-Financial 9,078,139 2.5
Total Investments* 354,746,940 98.4
Cash and receivables, net of liabilities 5,779,877 1.6
----------- -----
Net Assets $360,526,817 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
SMALL/MID CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-98.4%
FINANCIAL-24.2%
MAJOR REGIONAL
BANKS-4.1%
Central Pacific Financial
Corp. 101,900 $ 3,943,530
Trustmark Corp. 128,806 3,989,122
UnionBanCal Corp. 45,900 2,964,681
Whitney Holding Corp. 114,900 4,064,013
------------
14,961,346
MULTI-LINE
INSURANCE-1.8%
StanCorp Financial Group,
Inc. 127,000 6,465,569
PROPERTY - CASUALTY
INSURANCE-8.2%
Arch Capital Group Ltd. (a) 87,700 5,214,642
Aspen Insurance Holdings
Ltd. 190,800 4,443,732
Old Republic International
Corp. 268,375 5,735,174
PartnerRe Ltd. 17,700 1,133,685
Platinum Underwriters
Holdings Ltd. 179,400 5,019,612
Radian Group, Inc. 100,600 6,215,068
RenaissanceRe Holdings Ltd. 33,600 1,628,256
------------
29,390,169
REAL ESTATE INVESTMENT
TRUST-2.9%
Digital Realty Trust, Inc. 126,700 3,128,223
FelCor Lodging Trust, Inc. 261,550 5,686,097
Strategic Hotels & Resorts,
Inc. 85,500 1,773,270
------------
10,587,590
SAVINGS AND LOAN-5.8%
ASTORIA FINANCIAL CORP. 175,900 5,356,155
MAF Bancorp, Inc. 79,897 3,422,787
Provident Financial Services,
Inc. 232,700 4,176,965
Sovereign Bancorp, Inc. 141,750 2,878,943
Washington Federal, Inc. 36,500 846,435
Webster Financial Corp. 91,900 4,359,736
------------
21,041,021
MISCELLANEOUS
FINANCIAL-1.4%
A.G. Edwards, Inc. 88,500 4,895,820
------------
87,341,515
CAPITAL
EQUIPMENT-10.9%
AEROSPACE - DEFENSE-1.1%
Goodrich Corp. 104,275 4,201,240
AUTO TRUCKS - PARTS-2.6%
ArvinMeritor, Inc. 263,200 $ 4,524,408
TRW Automotive Holdings
Corp. (a) 174,000 4,746,720
------------
9,271,128
ELECTRICAL
EQUIPMENT-3.6%
Acuity Brands, Inc. 107,700 4,190,607
Checkpoint Systems, Inc. (a) 121,500 2,698,515
Cooper Industries Ltd. Cl. A 42,200 3,921,224
The Genlyte Group, Inc. (a) 29,600 2,143,928
------------
12,954,274
MACHINERY-2.1%
Moog, Inc. Cl. A (a) 28,900 988,958
Terex Corp. (a) 66,600 6,573,419
------------
7,562,377
MISCELLANEOUS CAPITAL
GOODS-1.5%
SPX Corp. 96,600 5,404,770
------------
39,393,789
TECHNOLOGY-10.0%
COMMUNICATION -
EQUIP. MFRS-2.6%
ADC Telecommunications,
Inc. (a) 74,757 1,260,403
Andrew Corp. (a) 307,900 2,727,994
CommScope, Inc. (a) 165,500 5,200,011
------------
9,188,408
COMPUTER/
INSTRUMENTATION-1.7%
Celestica, Inc. (a) 458,800 4,376,952
Sanmina-SCI Corp. (a) 411,679 1,893,723
------------
6,270,675
COMPUTER SERVICES/
SOFTWARE-1.3%
CSG Systems International,
Inc. (a) 191,400 4,735,236
SEMICONDUCTORS-2.6%
AVX Corp. 96,000 1,515,840
Vishay Intertechnology,
Inc. (a) 299,000 4,703,270
Zoran Corp. (a) 135,400 3,295,636
------------
9,514,746
MISCELLANEOUS
INDUSTRIAL
TECHNOLOGY-1.8%
Arrow Electronics, Inc. (a) 81,200 2,614,640
Intergraph Corp. (a) 40,003 1,259,694
3
SMALL/MID CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Solectron Corp. (a) 107,400 $ 367,308
Tech Data Corp. (a) 57,500 2,202,825
------------
6,444,467
------------
36,153,532
CONSUMER
CYCLICALS-8.1%
RETAILERS-6.2%
AutoNation, Inc. (a) 151,149 3,240,635
Big Lots, Inc. (a) 212,000 3,620,960
Furniture Brands International,
Inc. 168,100 3,503,204
Office Depot, Inc. (a) 153,000 5,814,000
Payless ShoeSource, Inc. (a) 163,900 4,453,163
Saks, Inc. (a) 102,925 1,664,297
------------
22,296,259
TEXTILES/SHOES -
APPAREL MFG.-1.9%
Liz Claiborne, Inc. 108,100 4,006,186
V.F. Corp. 44,500 3,022,440
------------
7,028,626
------------
29,324,885
SERVICES-8.1%
AIR TRANSPORT-2.5%
Alaska Air Group, Inc. (a) 111,700 4,403,214
Continental Airlines, Inc.
Cl. B (a) 150,600 4,487,880
------------
8,891,094
RAILROADS-1.5%
Laidlaw International, Inc. 212,100 5,344,920
TRUCKERS-2.5%
Con-way, Inc. 105,925 6,136,235
Ryder System, Inc. 48,200 2,816,326
------------
8,952,561
MISCELLANEOUS
INDUSTRIAL
TRANSPORTATION-1.6%
GATX Corp. 138,200 5,873,500
------------
29,062,075
CONSUMER GROWTH-7.8%
DRUGS-0.6%
Endo Pharmaceuticals
Holdings, Inc. (a) 61,375 2,024,148
ENTERTAINMENT-1.7%
Vail Resorts, Inc. (a) 169,100 6,273,610
HOSPITAL
MANAGEMENT-1.0%
Universal Health Services, Inc.
Cl. B 70,900 3,563,434
HOSPITAL SUPPLIES-0.6%
Owens & Minor, Inc. 76,725 $ 2,194,335
OTHER MEDICAL-1.5%
PerkinElmer, Inc. 262,300 5,482,070
PHOTOGRAPHY-1.1%
IKON Office Solutions, Inc. 319,400 4,024,440
PUBLISHING-1.3%
The Reader's Digest
Association, Inc. 321,200 4,483,952
------------
28,045,989
CONSUMER STAPLES-7.4%
BEVERAGES - SOFT, LITE &
HARD-1.0%
Molson Coors Brewing Co.
Cl. B 52,200 3,543,336
FOODS-3.1%
Corn Products International,
Inc. 66,000 2,019,600
Performance Food Group
Co. (a) 184,400 5,602,072
Universal Corp. 96,700 3,599,174
------------
11,220,846
RESTAURANTS-2.2%
Jack in the Box, Inc. (a) 85,200 3,339,840
Papa John's International,
Inc. (a) 137,654 4,570,113
------------
7,909,953
RETAIL STORES -
FOOD-1.1%
Longs Drug Stores Corp. 68,200 3,111,284
SUPERVALU, Inc. 30,000 921,000
------------
4,032,284
------------
26,706,419
UTILITIES-6.0%
ELECTRICAL
COMPANIES-6.0%
Allegheny Energy, Inc. (a) 169,100 6,268,537
Constellation Energy Group,
Inc. 41,000 2,235,320
Northeast Utilities 171,200 3,538,704
Puget Energy, Inc. 231,800 4,979,064
Wisconsin Energy Corp. 114,400 4,610,320
------------
21,631,945
INDUSTRIAL
RESOURCES-5.2%
STEEL-2.9%
Chaparral Steel Co. (a) 30,300 2,182,206
Quanex Corp. 89,200 3,841,844
Steel Dynamics, Inc. 66,100 4,345,414
------------
10,369,464
4
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
MISCELLANEOUS
METALS-2.3%
Commercial Metals Co. 73,800 $ 1,896,660
Mueller Industries, Inc. 75,000 2,477,250
Silgan Holdings, Inc. 106,480 3,940,825
------------
8,314,735
------------
18,684,199
ENERGY-5.2%
OFFSHORE DRILLING-1.4%
Rowan Cos., Inc. 140,000 4,982,600
OIL SERVICES-2.6%
Hanover Compressor Co. (a) 248,233 4,661,816
Plains Exploration &
Production Co. (a) 114,200 4,629,668
------------
9,291,484
OIL WELL EQUIPMENT &
SERVICES-0.5%
Todco, Cl. A (a) 42,100 1,719,785
OILS - INTEGRATED
DOMESTIC-0.7%
Hess Corp. 49,200 2,600,220
------------
18,594,089
COMMODITIES-3.0%
CHEMICALS-0.5%
Albemarle Corp. 34,500 1,651,860
CONTAINERS - METAL/
GLASS/PAPER-1.1%
Owens-Illinois, Inc.(a) 226,400 3,794,464
MISCELLANEOUS
INDUSTRIAL
COMMODITIES-0.6%
United Stationers, Inc. (a) 47,095 2,322,725
MISCELLANEOUS
METALS-0.8%
Reliance Steel & Aluminum
Co. 35,700 $ 2,961,315
------------
10,730,364
NON-FINANCIAL-2.5%
BUILDING MATERIALS -
CEMENT-0.4%
Texas Industries, Inc. 30,300 1,608,930
MISCELLANEOUS
BUILDING-2.1%
Harsco Corp. 35,500 2,767,580
Quanta Services, Inc. (a) 271,300 4,701,629
------------
7,469,209
------------
9,078,139
Total Common Stocks
(cost $302,519,259) 354,746,940
SHORT-TERM
INVESTMENT-3.7%
TIME DEPOSIT-3.7%
The Bank of New York
4.25%, 7/03/06
(cost $13,525,000) $ 13,525 13,525,000
TOTAL
INVESTMENTS-102.1%
(cost $316,044,259) 368,271,940
Other assets less
liabilities-(2.1%) (7,745,123)
------------
NET ASSETS-100% $ 360,526,817
(a) Non-income producing security.
See Notes to Financial Statements.
5
SMALL/MID CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $316,044,259) $ 368,271,940
CASH 87
Receivable for investment securities sold 2,607,090
Receivable for capital stock sold 414,979
Dividends and interest receivable 243,055
Total assets 371,537,151
LIABILITIES
Payable for capital stock redeemed 8,555,263
Payable for investment securities purchased 2,048,312
Advisory fee payable 231,936
Distribution fee payable 46,075
Administrative fee payable 19,607
Transfer agent fee payable 131
Accrued expenses 109,010
Total liabilities 11,010,334
NET ASSETS $ 360,526,817
COMPOSITION OF NET ASSETS
Capital stock, at par $ 21,370
Additional paid-in capital 291,830,521
Undistributed net investment income 923,476
Accumulated net realized gain on investment transactions 15,523,769
Net unrealized appreciation of investments 52,227,681
$ 360,526,817
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
A $139,401,980 8,246,190 $ 16.91
B $221,124,837 13,123,741 $ 16.85
See Notes to Financial Statements.
6
SMALL/MID CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $1,472) $ 2,475,435
Interest 284,014
Total investment income 2,759,449
EXPENSES
Advisory fee 1,311,863
Distribution fee--Class B 259,327
Transfer agency--Class A 1,042
Transfer agency--Class B 1,532
Printing 81,225
Custodian 66,604
Administrative 39,000
Audit 20,248
Legal 7,995
Directors' fees 648
Miscellaneous 9,283
Total expenses 1,798,767
Net investment income 960,682
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 15,563,022
Net change in unrealized appreciation/depreciation of investments 6,197,152
Net gain on investment transactions 21,760,174
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 22,720,856
See Notes to Financial Statements.
7
SMALL/MID CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 960,682 $ 1,099,713
Net realized gain on investment transactions 15,563,022 24,799,701
Net change in unrealized appreciation/depreciation of investments 6,197,152 (6,474,515)
Net increase in net assets from operations 22,720,856 19,424,899
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A (603,339) (876,310)
Class B (500,061) (892,522)
Net realized gain on investment transactions
Class A (9,975,197) (5,292,917)
Class B (14,763,715) (6,946,948)
CAPITAL STOCK TRANSACTIONS
Net increase 42,998,272 53,737,282
Total increase 39,876,816 59,153,484
NET ASSETS
Beginning of period 320,650,001 261,496,517
End of period (including undistributed net investment income
of $923,476 and $1,066,194, respectively) $ 360,526,817 $ 320,650,001
See Notes to Financial Statements.
8
SMALL/MID CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Small/Mid Cap Value Portfolio (the "Portfolio"), formerly
AllianceBernstein Small Cap Value Portfolio, is a series of AllianceBernstein
Variable Products Series Fund, Inc. (the "Fund"). The Portfolio's investment
objective is to seek long-term growth of capital. The Portfolio is diversified
as defined under the Investment Company Act of 1940. The Fund was incorporated
in the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund offers twenty-three separately managed pools of assets which
have differing investment objectives and policies. The Portfolio commenced
operations on May 1, 2001. 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
9
SMALL/MID CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly. The
Adviser has agreed to waive its fees and bear certain expenses to the extent
necessary to limit total operating expenses on an annual basis to 1.20% and
1.45% of the daily average net assets for Class A and Class B shares,
respectively. For the six months ended June 30, 2006, there were no expenses
waived by the Adviser.
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $124,084, none of which was paid to Sanford C.
Bernstein & Co. LLC and Sanford C.Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- -------------
Investment securities (excluding U.S. government securities) $ 118,223,285 $ 90,253,364
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
GROSS UNREALIZED APPRECIATION $ 58,709,934
Gross unrealized depreciation (6,482,253)
Net unrealized appreciation $ 52,227,681
11
SMALL/MID CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
Shares sold 932,884 1,654,124 $ 16,636,775 $ 27,337,346
Shares issued in
reinvestment
of dividends and
distributions 640,735 388,002 10,578,536 6,169,227
Shares redeemed (1,197,061) (1,237,579) (20,840,481) (20,426,892)
Net increase 376,558 804,547 $ 6,374,830 $ 13,079,681
CLASS B
Shares sold 2,038,624 3,361,531 $ 35,835,042 $ 55,477,125
Shares issued
in reinvestment
of dividends and
distributions 927,889 494,604 15,263,776 7,839,470
Shares redeemed (817,243) (1,372,037) (14,475,376) (22,658,994)
Net increase 2,149,270 2,484,098 $ 36,623,442 $ 40,657,601
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
------------ ------------
Distributions paid from:
Ordinary income $ 5,220,753 $ 1,422,125
Net long-term capital gains 8,787,944 3,585,756
Total taxable distributions 14,008,697 5,007,881
Total distributions paid $ 14,008,697 $ 5,007,881
13
SMALL/MID CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 5,274,370
Undistributed long-term capital gains 20,491,483
Unrealized appreciation/(depreciation) 46,030,529
Total accumulated earnings/(deficit) $ 71,796,382
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until December 31,
2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
14
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that
15
SMALL/MID CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
certain of the defendants misrepresented and omitted from registration
statements and other reports material facts concerning such payments, and (iii)
that certain defendants caused such conduct as control persons of other
defendants. The Aucoin Complaint asserts claims for violation of Sections
34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206 and 215 of
the Advisers Act, breach of common law fiduciary duties, and aiding and
abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
16
SMALL/MID CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
------------------------------------------------------------------------------
SIX MONTHS MAY 2, 2001(a)
ENDED YEAR ENDED DECEMBER 31, TO
JUNE 30, 2006 -------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $17.06 $16.84 $14.49 $10.46 $11.18 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .06 .09(c) .14(c) .04(c) .12(c) .14(c)
Net realized and unrealized gain (loss)
on investment transactions 1.11 1.02 2.60 4.23 (.81) 1.04
Net increase (decrease) in net asset value
from operations 1.17 1.11 2.74 4.27 (.69) 1.18
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.08) (.13) (.03) (.07) (.02) -0-
Distributions from net realized gain
on investment transactions (1.24) (.76) (.36) (.17) (.01) -0-
Total dividends and distributions (1.32) (.89) (.39) (.24) (.03) -0-
Net asset value, end of period $16.91 $17.06 $16.84 $14.49 $10.46 $11.18
TOTAL RETURN
Total investment return based on
net asset value (d) 7.02% 6.91% 19.30% 41.26% (6.20)% 11.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $139,402 $134,235 $118,981 $90,949 $55,592 $21,076
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements .87%(e)(f) .87% .86% 1.20% 1.13% .95%(e)
Expenses, before waivers
and reimbursements .87%(e)(f) .87% 1.09% 1.28% 1.41% 2.65%(e)
Net investment income .72%(e)(f) .53%(c) .96%(c) .34%(c) 1.04%(c) 1.99%(c)(e)
Portfolio turnover rate 27% 33% 30% 21% 28% 12%
See footnote summary on page 18.
17
SMALL/MID CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------------
SIX MONTHS MAY 2, 2001(g)
ENDED YEAR ENDED DECEMBER 31, TO
JUNE 30, 2006 -------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $16.99 $16.79 $14.46 $10.46 $11.20 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .04 .05(c) .11(c) .01(c) .08(c) .11(c)
Net realized and unrealized gain (loss)
on investment transactions 1.10 1.01 2.59 4.22 (.79) 1.09
Net increase (decrease) in net asset value
from operations 1.14 1.06 2.70 4.23 (.71) 1.20
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.04) (.10) (.01) (.06) (.02) -0-
Distributions from net realized gain
on investment transactions (1.24) (.76) (.36) (.17) (.01) -0-
Total dividends and distributions (1.28) (.86) (.37) (.23) (.03) -0-
Net asset value, end of period $16.85 $16.99 $16.79 $14.46 $10.46 $11.20
TOTAL RETURN
Total investment return based
on net asset value (d) 6.90% 6.63% 19.08% 40.89% (6.37)% 12.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $221,125 $186,415 $142,516 $82,954 $22,832 $346
RATIO TO AVERAGE NET ASSETS OF:
Expenses, net of waivers
and reimbursements 1.12%(e)(f) 1.12% 1.12% 1.45% 1.43% 1.20%(e)
Expenses, before waivers
and reimbursements 1.12%(e)(f) 1.12% 1.34% 1.53% 1.70% 3.17%(e)
Net investment income .46%(e)(f) .29%(c) .75%(c) .05%(c) .74%(c) 2.17%(c)(e)
Portfolio turnover rate 27% 33% 30% 21% 28% 12%
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Net of expenses reimbursed or waived by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) Annualized.
(f) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(g) Commencement of operations.
18
SMALL/MID CAP VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Small/Mid Cap Value Portfolio (the "Fund"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services pursuant
to the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance
of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Specialty 75 bp on 1st $2.5 billion Small/Mid Cap Value
Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Small/Mid Cap Value Portfolio(3) $69,000 0.03%
1 It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
2 Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
3 The expense reimbursement has been waived by the Adviser.
19
SMALL/MID CAP VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's most recent fiscal year. The waiver is terminable by the Adviser on
May 1st of each year upon at least 60 days written notice. It should be noted
that the Fund was operating below its expense cap in the latest fiscal year;
accordingly the expense limitation undertaking of that Fund was of no effect.
The gross expense ratios of the Fund during the most recently completed fiscal
year are also listed below.
EXPENSE CAP PURSUANT TO
EXPENSE LIMITATION
FUND UNDERTAKING GROSS EXPENSE RATIO FISCAL YEAR END
Small/Mid Cap Value Class A 1.20% 1.09% December 31
Portfolio Class B 1.45% 1.34%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Small/Mid Cap Value $300.6 Small & Mid Cap 0.416%
Portfolio Value Schedule
95 bp on 1st $25 m
75 bp on next $25 m
65 bp on next $50 m
55 bp on the balance
MINIMUM ACCOUNT SIZE $10 M
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
20
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
Small/Mid Cap Value Client # 1 0.50%
Portfolio
Client # 2 0.72% on first $25 million
0.54% on next $225 million
0.50% thereafter
Client # 3 0.80%
Client # 4 1.00% on first $10 million
0.875% on next $10 million
0.75% thereafter
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Small/Mid Cap Value Portfolio 0.750 0.750 7/13
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(7) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Small/Mid Cap Value Portfolio 0.866 0.943 10/22 0.866 7/13
Based on this analysis, the Fund has equally favorable rankings on management
fees compared to total expenses.
4 It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the fee waiver or expense reimbursement that effectively
reduce the contractual fee rates. In addition, the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
5 Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
6 Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
7 Most recent fiscal year end Class A share total expense ratio.
21
SMALL/MID CAP VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Small/Mid Cap Value Portfolio $266,143
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Small/Mid Cap Value Portfolio $465,893
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.8 For the fiscal year ended December 31,
2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and
8 It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
22
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
pays liquidity rebates from electronic communications networks ("ECNs") derived
from trading for its clients, including the Fund. These credits and charges are
not being passed on to any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1 and 3 year performance rankings
of the Fund(9) relative to its Lipper Performance Group10 and Lipper
Performance Universe11 for the period ended September 30, 2005.
SMALL/MID CAP VALUE PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 12/13 19/23
3 year 2/13 2/20
Set forth below are the 1, 3 year and since inception performance returns of
the Fund (in bold)(12) versus its benchmark(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
SMALL/MID CAP VALUE PORTFOLIO 16.93 25.21 15.28
Russell 2500 Index 21.29 24.91 9.56
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
9 The performance rankings are for the Class A shares of the Fund.
10 The Lipper Performance Group is identical to the Lipper Expense Group.
11 For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
12 The performance returns are for the Class A shares of the Fund.
13 The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
23
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ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
JUNE 30, 2006
SEMI-ANNUAL REPORT
ALLIANCEBERNSTEIN UTILITY INCOME PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
o ARE NOT FDIC INSURED
o MAY LOSE VALUE
o ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEINR AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE MARKS
USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
UTILITY INCOME PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
UTILITY INCOME PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------------------------------------------------------------------------------------------------------
CLASS A
Actual $ 1,000 $ 1,053.85 $ 4.89 0.96%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,020.38 $ 4.81 0.96%
CLASS B
Actual $ 1,000 $ 1,053.09 $ 6.16 1.21%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,018.79 $ 6.06 1.21%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
Entergy Corp. (Common & Preferred) $ 2,510,933 3.9%
Exelon Corp. 2,159,540 3.3
PPL Corp. 2,131,800 3.3
Duke Energy Corp. 2,025,003 3.1
ONEOK, Inc. 1,936,876 3.0
FirstEnergy Corp. 1,843,140 2.8
TXU CORP. 1,827,661 2.8
Allegheny Energy, Inc. 1,775,653 2.7
America Movil, SA de C.V. Series L 1,661,670 2.6
AT&T, Inc. 1,637,143 2.5
------------ -----
$ 19,509,419 30.0%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
SECTOR U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
Utilities $ 56,420,159 86.8%
Consumer Services 3,070,550 4.7
Energy 2,111,297 3.2
Basic Industry 815,476 1.3
------------ -----
Total Investments* 62,417,482 96.0
Cash and receivables, net of liabilities 2,568,017 4.0
----------- -----
Net Assets $ 64,985,499 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
COMPANY SHARES U.S. $ VALUE
- ------------------------------------------------------------
COMMON & PREFERRED
STOCKS-94.8%
UTILITIES-86.8%
COMMUNICATION
EQUIPMENT-2.4%
Motorola, Inc. 14,900 $ 300,235
QUALCOMM, Inc. 19,300 773,351
Tim Participacoes, SA (ADR) 17,500 482,125
-------------
1,555,711
-------------
ELECTRIC & GAS
UTILITY-66.6%
AES Corp. (a) 60,600 1,118,070
AES Tiete, SA 46,593,600 1,097,130
AGL Resources, Inc. 39,600 1,509,552
Allegheny Energy, Inc. (a) 47,900 1,775,653
Ameren Corp. 15,100 762,550
American Electric Power Co.,
Inc. 15,583 533,718
Centerpoint Energy, Inc. 69,300 866,250
CLP Holdings Ltd. 119,000 696,317
Consolidated Edison, Inc. 27,100 1,204,324
CPFL Energia, SA (ADR) 11,700 427,635
Dominion Resources, Inc. 13,800 1,032,102
DPL, Inc. 27,000 723,600
Duke Energy Corp. 68,948 2,025,003
Edison International 31,400 1,224,600
Enel S.p.A. (ADR) 11,050 475,371
Entergy Corp. 20,300 1,436,225
Entergy Corp. pfd. 21,400 1,074,708
Equitable Resources, Inc. 30,000 1,005,000
Exelon Corp. 38,000 2,159,540
FirstEnergy Corp. 34,000 1,843,140
Fortum Oyj 28,000 715,343
FPL Group, Inc. 38,200 1,580,716
Georgia Power Co. pfd. 34,000 823,140
Great Plains Energy, Inc.
pfd. 28,000 647,640
Hong Kong & China Gas Co.,
Ltd. 425,000 934,048
New Jersey Resources Corp. 19,400 907,532
NSTAR 49,100 1,404,260
PG&E Corp. 37,700 1,480,856
Piedmont Natural Gas Co.,
Inc. 10,200 247,860
PNM Resources, Inc. pfd. 30,400 1,492,640
PPL Corp. 66,000 2,131,800
Questar Corp. 14,100 1,134,909
Scottish & Southern Energy 40,945 870,810
Sempra Energy 32,874 1,495,109
Southern Co. 27,200 871,760
Tractebel Energia, SA 41,800 332,138
TXU Corp. 30,568 1,827,661
Xcel Energy, Inc. 73,300 1,405,894
-------------
43,294,604
-------------
PIPELINES-9.0%
Enbridge, Inc. 19,100 583,887
Kinder Morgan, Inc. 11,970 1,195,683
ONEOK, Inc. 56,900 1,936,876
Southern Union Co. pfd. 6,900 555,105
The Williams Cos., Inc. 67,700 1,581,472
-------------
5,853,023
-------------
TELEPHONE UTILITY-4.4%
AT&T, Inc. 58,700 1,637,143
BellSouth Corp. 24,600 890,520
Verizon Communications, Inc. 10,700 358,343
-------------
2,886,006
-------------
MISCELLANEOUS-4.4%
Aqua America, Inc. 43,000 979,970
E.ON AG (ADR) 24,421 936,545
Peabody Energy Corp. 16,400 914,300
-------------
2,830,815
-------------
56,420,159
-------------
CONSUMER SERVICES-4.7%
BROADCASTING &
CABLE-1.2%s
Grupo Televisa, SA (ADR) 40,000 772,400
-------------
CELLULAR
COMMUNICATIONS-3.5%
America Movil, SA de C.V.
Series L (ADR) 49,960 1,661,670
Orascom Telecom Holding
SAE (GDR) (b) 15,600 636,480
-------------
2,298,150
-------------
3,070,550
-------------
ENERGY-2.0%
INTERNATIONAL-0.9%
Talisman Energy, Inc. 35,400 618,792
-------------
OIL SERVICE-1.1%
GlobalSantaFe Corp. 12,000 693,000
-------------
1,311,792
-------------
BASIC INDUSTRY-1.3%
MINING & METALS-1.3%
China Shenhua Energy Co.,
Ltd. (a) 439,500 815,476
-------------
Total Common & Preferred
Stocks (cost $48,937,213) 61,617,977
-------------
MUTUAL FUNDS-1.2%
Tortoise Energy Capital Corp.
(cost $825,165) 37,100 799,505
-------------
3
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- ------------------------------------------------------------
SHORT-TERM
INVESTMENT-3.7%
TIME DEPOSIT-3.7%
The Bank of New York
4.25%, 7/03/06
(cost $2,360,000) $ 2,360 $ 2,360,000
-------------
TOTAL
INVESTMENTS-99.7%
(cost $52,122,378) 64,777,482
Other assets less
liabilities-0.3% 208,017
-------------
NET ASSETS-100% $ 64,985,499
=============
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security is considered liquid and may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At June
30, 2006, the market value of this security amounted to $636,480 or 1.0% of net
assets.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
pfd. - Preferred Stock
See Notes to Financial Statements.
4
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
ASSETS
Investments in securities, at value (cost $52,122,378) $ 64,777,482
Cash 12,848
Receivable for investment securities sold 310,570
Dividends and interest receivable 93,925
Receivable for capital stock sold 40,559
------------
Total assets 65,235,384
------------
LIABILITIES
Payable for capital stock redeemed 120,245
Advisory fee payable 30,844
Custodian fee payable 26,570
Audit fee payable 21,444
Printing fee payable 20,192
Administrative fee payable 19,607
Distribution fee payable 2,279
Transfer agent fee payable 116
Accrued expenses 8,588
------------
Total liabilities 249,885
------------
NET ASSETS $ 64,985,499
============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 3,073
Additional paid-in capital 54,502,006
Undistributed net investment income 937,074
Accumulated net realized loss on investment and
foreign currency transactions (3,111,758)
Net unrealized appreciation of investments 12,655,104
------------
$ 64,985,499
============
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- --------------------------------------------------------------------------
A $ 54,299,749 2,565,699 $ 21.16
B $ 10,685,750 506,957 $ 21.08
See Notes to Financial Statements.
5
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $31,897) $ 1,257,012
Interest 32,332
------------
Total investment income 1,289,344
------------
EXPENSES
Advisory fee 187,892
Distribution fee--Class B 13,553
Transfer agency--Class A 1,051
Transfer agency--Class B 198
Custodian 61,805
Administrative 39,000
Audit 20,247
Printing 17,687
Legal 1,784
Directors' fees 503
Miscellaneous 2,224
------------
Total expenses 345,944
------------
Net investment income 943,400
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 4,838,588
Foreign currency transactions (10,074)
Net change in unrealized appreciation/depreciation of:
Investments (2,189,380)
Foreign currency denominated assets and liabilities 131
------------
Net gain on investment and foreign currency transactions 2,639,265
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,582,665
============
See Notes to Financial Statements.
6
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 943,400 $ 1,739,558
Net realized gain on investment and foreign
currency transactions 4,828,514 6,753,048
Net change in unrealized appreciation/depreciation
of investments and foreign currency denominated
assets and liabilities (2,189,249) 702,873
------------ ------------
Net increase in net assets from operations 3,582,665 9,195,479
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A (1,462,511) (1,190,148)
Class B (265,556) (138,039)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (5,102,868) 1,458,437
------------ ------------
Total increase (decrease) (3,248,270) 9,325,729
NET ASSETS
Beginning of period 68,233,769 58,908,040
------------ ------------
End of period (including undistributed net
investment income of $937,074 and $1,721,741,
respectively) $ 64,985,499 $ 68,233,769
============ ============
See Notes to Financial Statements.
7
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Utility Income Portfolio (the "Portfolio") is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is current income and long-term growth of
capital. Prior to February 1, 2006, the Portfolio's investment objective was to
seek current income and capital appreciation by investing primarily in equity
and fixed-income securities of companies in the utilities industry. The
Portfolio is diversified as defined under the Investment Company Act of 1940.
The Fund was incorporated in the State of Maryland on November 17, 1987, as an
open-end series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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
8
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
interim and may materially affect the value of those securities. To account for
this, the Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at rates of exchange
prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. 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 securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Portfolio amortizes premiums and accretes discounts as adjustments to interest
income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
9
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006 amounted to $45,035, of which $4,960 and $0, respectively, was
paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
------------ ------------
Investment securities (excluding U.S. government
securities) $ 16,187,297 $ 23,360,417
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was subtantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 13,191,093
Gross unrealized depreciation (535,989)
------------
Net unrealized appreciation $ 12,655,104
============
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
10
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
---------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
---------------- ------------ ---------------- -------------
CLASS A
Shares sold 168,129 912,042 $ 3,569,410 $ 17,909,287
Shares issued in reinvestment
of dividends 70,483 62,246 1,462,511 1,190,148
Shares redeemed (505,969) (1,024,664) (10,781,365) (20,038,375)
--------- --------- ------------- -------------
Net decrease (267,357) (50,376) $ (5,749,444) $ (938,940)
========= ========= ============= =============
CLASS B
Shares sold 150,877 329,410 $ 3,199,683 $ 6,459,035
Shares issued in reinvestment
of dividends 12,847 7,239 265,556 138,039
Shares redeemed (132,128) (221,266) (2,818,663) (4,199,697)
--------- --------- ------------- -------------
Net increase 31,596 115,383 $ 646,576 $ 2,397,377
========= ========= ============= =============
11
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
----------- -----------
Distributions paid from:
Ordinary income $ 1,328,187 $ 1,047,341
----------- -----------
Total taxable distributions 1,328,187 1,047,341
----------- -----------
Total distributions paid $ 1,328,187 $ 1,047,341
=========== ===========
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 1,721,741
Accumulated capital and other losses (7,658,594)(a)
Unrealized appreciation/(depreciation) 14,562,675(b)
-----------
Total accumulated earnings/(deficit) $ 8,625,822
===========
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$7,658,594, of which $7,213,715 expires in the year 2010 and $444,879 expires
in the year 2011. During the current fiscal year, the Portfolio utilized
capital loss carryforwards of $6,748,228. To the extent future capital gains
are offset by capital loss carryforwards, such gains will not be distributed.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
12
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until December 31,
2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund,
13
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
because each was approved by fund trustees on the basis of materially
misleading information with respect to the level of market timing permitted in
funds managed by the Adviser. The claims asserted in the other three
consolidated amended complaints are similar to those that the respective
plaintiffs asserted in their previous federal lawsuits. All of these lawsuits
seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced
14
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
above. On October 19, 2005, the District Court dismissed each of the claims set
forth in the Aucoin Consolidated Amended Complaint, except for plaintiffs'
claim under Section 36(b) of the Investment Company Act. On January 11, 2006,
the District Court granted defendants' motion for reconsideration and dismissed
the remaining Section 36(b) claim. On May 31, 2006 the District Court denied
plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
15
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 -------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.64 $ 18.17 $ 14.95 $ 12.86 $ 16.82 $ 22.65
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .30 .53 .43(b) .35 .36 .29
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions .80 2.35 3.13 2.18 (4.06) (5.23)
Net increase (decrease) in net asset
value from operations 1.10 2.88 3.56 2.53 (3.70) (4.94)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.58) (.41) (.34) (.44) (.26) (.76)
Distributions from net realized gain on
investment transactions -0- -0- -0- -0- -0- (.13)
Total dividends and distributions (.58) (.41) (.34) (.44) (.26) (.89)
Net asset value, end of period $ 21.16 $ 20.64 $ 18.17 $ 14.95 $ 12.86 $ 16.82
TOTAL RETURN
Total investment return based on
net asset value (c) 5.39% 16.05% 24.33% 19.88% (22.12)% (22.50)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $54,299 $58,468 $52,391 $43,323 $40,140 $62,684
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .96%(d)(e) .97% 1.08% 1.48% 1.22% 1.02%
Expenses, before waivers and
reimbursements .96%(d)(e) .97% 1.21% 1.48% 1.22% 1.02%
Net investment income 2.81%(d)(e) 2.72% 2.69%(b) 2.60% 2.60% 1.49%
Portfolio turnover rate 24% 52% 48% 76% 90% 25%
See footnote summary on page 17.
16
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
-----------------------------------------------------------------------------
SIX MONTHS
ENDED JULY 22, 2002(f)
JUNE 30, YEAR ENDED DECEMBER 31, TO
2006 ------------------------------------ DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002
-----------------------------------------------------------------------------
Net asset value, beginning of period $ 20.54 $ 18.10 $ 14.92 $ 12.86 $ 11.40
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a) .27 .48 .38(b) .28 .07
Net realized and unrealized gain on investment
and foreign currency transactions .81 2.34 3.13 2.21 1.39
Net increase in net asset value from operations 1.08 2.82 3.51 2.49 1.46
LESS: DIVIDENDS
Dividends from net investment income (.54) (.38) (.33) (.43) -0-
Net asset value, end of period $ 21.08 $ 20.54 $ 18.10 $ 14.92 $ 12.86
TOTAL RETURN
Total investment return based on net asset
value (c) 5.31% 15.76% 24.01% 19.64% 12.81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $10,686 $9,766 $6,517 $2,802 $39
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.21%(d)(e) 1.22% 1.30% 1.73% 1.45%(e)
Expenses, before waivers and
reimbursements 1.21%(d)(e) 1.22% 1.43% 1.73% 1.45%(e)
Net investment income 2.59%(d)(e) 2.45% 2.41%(b) 2.07% 1.92%(e)
Portfolio turnover rate 24% 52% 48% 76% 90%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
(f) Commencement of distribution.
17
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Utility Income Portfolio (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Value 55 bp on 1st $2.5 billion Utility Income Portfolio
45 bp on next $2.5 billion
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Utility Income Portfolio $69,000 0.14%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
18
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Utility Income Portfolio Class A 1.21% December 31
Class B 1.43%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(3)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Utility Income Portfolio 0.550 0.650 1/7
(3) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
19
_______________________________________________________________________________
UTILITY INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(4). Lipper describes a Lipper Expense Group as a
representative sample of comparable funds. The results of that analysis are set
forth below:
LIPPER LIPPER
EXPENSE UNIVERSE GROUP
FUND RATIO (%)(5) MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Utility Income Portfolio 1.075 0.831 7/7
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
UTILITY INCOME PORTFOLIO $11,108
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Utility Income Portfolio $19,883
(4) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(5) Most recent fiscal year end Class A share total expense ratio.
20
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(6) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
Although the Fund did not effect any brokerage transaction and pay commissions
to the Adviser's affiliate, Sanford C. Bernstein & Co. LLC, and/or its U.K.
based affiliate, Sanford C. Bernstein Ltd., (collectively "SCB"), during the
Fund's recent fiscal year, the potential for such events exist. The Adviser
represented that SCB's profitability from any business conducted with the Fund
would be comparable to the profitability of SCB's dealings with other similar
third party clients. In the ordinary course of business, SCB receives and pays
liquidity rebates from electronic communications networks ("ECNs") derived from
trading for its clients. These credits and charges are not being passed on to
any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(7) relative to its Lipper Performance Group(8) and Lipper
Performance Universe(9) for the period ended September 30, 2005.
UTILITY INCOME PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 4/7 5/9
3 year 5/7 6/9
5 year 3/6 4/8
10 year 4/6 5/8
(6) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
(7) The performance rankings are for the Class A shares of the Fund.
(8) The Lipper Performance Group is identical to the Lipper Expense Group.
(9) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
21
UTILITY INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(10) versus its benchmark(11).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
Since
FUND 1 Year 3 Year 5 Year 10 Year Inception
- -------------------------------------------------------------------------------
UTILITY INCOME PORTFOLIO 34.28 24.34 1.33 9.38 9.62
S&P 500 GICS Utility
Composite 38.67 26.71 -0.36 8.27 9.48
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(10) The performance returns are for the Class A shares of the Fund.
(11) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
22
AllianceBernstein Variable Products Series Fund, Inc.
Semi-Annual Report
June 30, 2006
> AllianceBernstein Value Portfolio
SEMI-ANNUAL REPORT
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
o ARE NOT FDIC INSURED
o MAY LOSE VALUE
o ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEIN(R) AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE
MARKS USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
VALUE PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
VALUE PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ----------------------------------------------------------------------------------------------------
CLASS A
Actual $1,000 $1,053.10 $3.61 0.71%
Hypothetical (5% return before
expenses) $1,000 $1,021.27 $3.56 0.71%
CLASS B
Actual $1,000 $1,051.62 $4.83 0.95%
Hypothetical (5% return before
expenses) $1,000 $1,020.08 $4.76 0.95%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
VALUE PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Exxon Mobil Corp. $12,674,910 5.4%
Citigroup, Inc. 9,995,327 4.2
Bank of America Corp. 8,566,610 3.6
Pfizer, Inc. 6,857,934 2.9
JPMorgan Chase & Co. 6,287,400 2.7
AT&T, Inc. 5,123,393 2.2
American International Group, Inc. 4,907,055 2.1
Altria Group, Inc. 4,453,530 1.9
General Electric Co. 4,396,864 1.8
Verizon Communications 4,072,384 1.7
----------- -----
$67,335,407 28.5%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Financial $ 77,344,012 32.8%
Energy 29,374,649 12.4
Consumer Staples 26,124,626 11.1
Utilities 21,477,940 9.1
Consumer Growth 19,964,615 8.5
Technology 15,261,667 6.5
Consumer Cyclicals 11,896,564 5.0
Capital Equipment 10,722,504 4.5
Industrial Resources 4,401,239 1.9
Services 3,165,381 1.3
Commodities 2,774,960 1.2
Defense 2,627,382 1.1
Consumer Manufacturing 728,625 0.3
Health Care 695,872 0.3
Industrial Commodities 567,786 0.2
------------- -----
Total Investments* 227,127,822 96.2
Cash and receivables, net of liabilities 8,835,807 3.8
------------- -----
Net Assets $ 235,963,629 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-96.2%
FINANCIAL-32.8%
BANKS-6.9%
Citigroup, Inc. 207,200 $ 9,995,327
JPMorgan Chase & Co. 149,700 6,287,400
----------
16,282,727
FINANCE - PERSONAL LOANS-0.5%
Countrywide Credit
Industries, Inc. 29,700 1,130,976
LIFE INSURANCE-2.4%
Genworth Financial, Inc.
Cl. A 39,000 1,358,760
MetLife, Inc. 33,900 1,736,019
Prudential Financial, Inc. 13,000 1,010,100
Torchmark Corp. 12,700 771,144
UnumProvident Corp. 44,100 799,533
----------
5,675,556
MAJOR REGIONAL BANKS-10.5%
Bank of America Corp. 178,100 8,566,610
BB&T Corp. 13,500 561,465
Comerica, Inc. 21,600 1,122,984
Huntington Bancshares, Inc. 54,600 1,287,468
KeyCorp 27,950 997,256
Mellon Financial Corp. 31,300 1,077,659
National City Corp. 50,900 1,842,071
PNC Financial Services
Group 14,700 1,031,499
Regions Financial Corp. 43,500 1,440,720
SunTrust Banks, Inc. 17,600 1,342,176
U.S. Bancorp 38,600 1,191,968
Wachovia Corp. 52,300 2,828,384
Wells Fargo & Co. 24,000 1,609,920
----------
24,900,180
MULTI-LINE INSURANCE-2.9%
American International
Group, Inc. 83,100 4,907,055
The Hartford Financial
Services Group, Inc. 22,900 1,937,340
----------
6,844,395
PROPERTY - CASUALTY INSURANCE-3.0%
ACE Ltd. 9,900 500,841
Allstate Corp. 7,500 410,475
Chubb Corp. 25,000 1,247,500
Old Republic International
Corp. 32,000 683,840
PartnerRe Ltd. 4,300 275,415
RenaissanceRe Holdings
Ltd. 16,300 789,898
The St. Paul Travelers Cos.,
Inc. 51,133 2,279,509
XL Capital Ltd. Cl. A 14,900 913,370
----------
7,100,848
SAVINGS AND LOAN-3.2%
Astoria Financial Corp. 21,750 662,288
Fannie Mae 54,100 2,602,210
Freddie Mac 41,900 2,388,719
Washington Mutual, Inc. 39,800 1,814,084
----------
7,467,301
MISCELLANEOUS FINANCIAL-3.4%
Lehman Brothers
Holdings, Inc. 14,400 938,160
MBIA, Inc. 11,800 690,890
Merrill Lynch & Co., Inc. 49,000 3,408,440
MGIC Investment Corp. 11,900 773,500
Morgan Stanley 14,400 910,224
The Goldman Sachs
Group, Inc. 5,300 797,279
Waddell & Reed Financial,
Inc. Cl. A 20,600 423,536
----------
7,942,029
----------
77,344,012
ENERGY-12.4%
GAS PIPELINES-0.1%
El Paso Corp. 23,000 345,000
OFFSHORE DRILLING-1.3%
ENSCO International, Inc. 2,100 96,642
GlobalSantaFe Corp. 22,100 1,276,275
Noble Corp. 14,000 1,041,880
Rowan Cos., Inc. 19,200 683,328
----------
3,098,125
OILS - INTEGRATED DOMESTIC-3.2%
ConocoPhillips 45,800 3,001,274
Marathon Oil Corp. 27,100 2,257,430
Occidental Petroleum Corp. 22,100 2,266,355
----------
7,525,059
OILS - INTEGRATED INTERNATIONAL-7.8%
BP Plc (ADR) 15,500 1,078,955
ChevronTexaco Corp. 60,400 3,748,424
Exxon Mobil Corp. 206,600 12,674,910
Total, SA (ADR) 13,800 904,176
----------
18,406,465
----------
29,374,649
CONSUMER STAPLES-11.1%
BEVERAGES - SOFT, LITE & HARD-1.4%
Molson Coors Brewing Co. Cl. B 7,500 509,100
PepsiCo, Inc. 11,600 696,464
The Coca-Cola Co. 47,000 2,021,940
----------
3,227,504
3
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
FOOD-2.2%
ConAgra Foods, Inc. 53,000 $ 1,171,830
Del Monte Foods Co. 29,500 331,285
General Mills, Inc. 26,200 1,353,492
Kellogg Co. 27,800 1,346,354
Kraft Foods, Inc. Cl. A 13,800 426,420
Sara Lee Corp. 40,600 650,412
----------
5,279,793
HOUSEHOLD PRODUCTS-0.6%
Colgate-Palmolive Co. 24,500 1,467,550
RESTAURANTS-1.1%
McDonald's Corp. 80,100 2,691,360
RETAIL STORES - FOOD-1.3%
Safeway, Inc. 48,800 1,268,800
SUPERVALU, Inc. 16,400 503,480
The Kroger Co. 59,500 1,300,670
----------
3,072,950
SOAPS-1.8%
Clorox Co. 15,000 914,550
The Procter & Gamble Co. 59,200 3,291,520
----------
4,206,070
SUGAR REFINERS-0.4%
Archer-Daniels-Midland
Co. 19,805 817,550
TOBACCO-2.3%
Altria Group, Inc. 60,650 4,453,530
UST, Inc. 20,100 908,319
----------
5,361,849
----------
26,124,626
UTILITIES-9.1%
ELECTRIC COMPANIES-2.6%
American Electric Power
Co., Inc. 28,075 961,569
Dominion Resources, Inc. 25,200 1,884,708
Entergy Corp. 18,900 1,337,175
Northeast Utilities 30,700 634,569
Pinnacle West Capital Corp. 26,600 1,061,606
Wisconsin Energy Corp. 3,000 120,900
Xcel Energy, Inc. 9,700 186,046
----------
6,186,573
TELEPHONE-6.5%
American Tower Corp.
Cl. A (a) 11,000 342,320
AT&T, Inc. 183,700 5,123,392
BellSouth Corp. 63,000 2,280,600
Crown Castle International
Corp. (a) 37,370 1,290,760
Embarq Corp. (a) 4,950 202,901
Sprint Nextel Corp. 99,000 1,979,010
Verizon Communications 121,600 4,072,384
----------
15,291,367
----------
21,477,940
CONSUMER GROWTH-8.5%
ADVERTISING-0.3%
The Interpublic Group of
Cos., Inc. (a) 76,900 642,115
DRUGS-4.6%
Eli Lilly & Co. 20,000 1,105,400
Merck & Co., Inc. 80,200 2,921,686
Pfizer, Inc. 292,200 6,857,934
----------
10,885,020
ENTERTAINMENT-2.5%
CBS Corp. Cl. B 62,075 1,679,129
Time Warner, Inc. 172,600 2,985,980
Viacom, Inc. Cl. B (a) 30,175 1,081,472
Walt Disney Co. 6,300 189,000
----------
5,935,581
HOSPITAL MANAGMENT-0.1%
Tenet Healthcare Corp. (a) 15,400 107,492
RADIO - TV BROADCASTING-1.0%
Comcast Corp. Cl. A (a) 73,134 2,394,407
----------
19,964,615
TECHNOLOGY-6.5%
COMMUNICATION - EQUIP. MFRS.-1.5%
ADC Telecommunications,
Inc. (a) 27,514 463,886
Cisco Systems, Inc. (a) 32,100 626,913
Corning, Inc. (a) 37,500 907,125
Nokia Oyj (ADR) 51,100 1,035,286
Tellabs, Inc. (a) 36,100 480,491
----------
3,513,701
COMPUTER SERVICES/SOFTWARE-1.4%
Ceridian Corp. (a) 35,000 855,400
Electronic Data Systems
Corp. 54,400 1,308,864
Microsoft Corp. 49,800 1,160,340
----------
3,324,604
COMPUTER/INSTRUMENTATION-1.0%
Celestica, Inc. (a) 38,300 365,382
Flextronics International
Ltd. (a) 57,900 614,898
Sanmina-SCI Corp. (a) 111,000 510,600
Solectron Corp. (a) 247,210 845,458
----------
2,336,338
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMPUTERS-2.0%
Hewlett-Packard Co. 101,328 $ 3,210,071
International Business
Machines Corp. 19,200 1,474,944
----------
4,685,015
SEMICONDUCTORS-0.3%
Agere System, Inc. (a) 42,210 620,487
MISCELLANEOUS INDUSTRIAL TECHNOLOGY-0.3%
Arrow Electronics, Inc. (a) 11,600 373,520
Tech Data Corp. (a) 10,650 408,002
----------
781,522
----------
15,261,667
CONSUMER CYCLICALS-5.0%
AUTOS & AUTO PARTS-2.4%
American Axle & Manufacturing
Holdings, Inc. 7,500 128,325
Autoliv, Inc. 22,800 1,289,796
BorgWarner, Inc. 16,200 1,054,620
Daimlerchrysler AG 23,400 1,155,024
Magna International, Inc.
Cl. A 14,500 1,043,565
Toyota Motor Corp. (ADR) 10,000 1,045,900
----------
5,717,230
RETAILERS-1.4%
Limited Brands 39,500 1,010,805
Office Depot, Inc. (a) 43,000 1,634,000
Target Corp. 14,100 689,067
----------
3,333,872
TEXTILES/SHOES - APPAREL MFG.-0.5%
Jones Apparel Group, Inc. 20,600 654,874
V.F. Corp. 7,900 536,568
----------
1,191,442
TIRES & RUBBER GOODS-0.1%
Cooper Tire & Rubber Co. 11,100 123,654
TOYS-0.3%
Mattel, Inc. 49,200 812,292
MISCELLANEOUS CONSUMER CYCLICALS-0.3%
Newell Rubbermaid, Inc. 27,800 718,074
----------
11,896,564
CAPITAL EQUIPMENT-4.5%
AEROSPACE - DEFENSE-0.9%
B.F. Goodrich Corp. 21,700 874,293
The Boeing Co. 16,300 1,335,133
----------
2,209,426
AUTO TRUCKS - PARTS-0.4%
Eaton Corp. 13,500 1,017,900
ELECTRICAL EQUIPMENT-2.3%
Cooper Industries Ltd. Cl. A 7,000 650,440
General Electric Co. 133,400 4,396,864
Hubbell Inc. Cl. B 6,800 324,020
----------
5,371,324
MISCELLANEOUS CAPITAL GOODS-0.9%
SPX Corp. 14,400 805,680
Textron, Inc. 14,300 1,318,174
----------
2,123,854
----------
10,722,504
INDUSTRIAL RESOURCES-1.9%
CHEMICALS-0.3%
Arkema (ADR) (a) 345 13,459
The Lubrizol Corp. 15,700 625,645
----------
639,104
CONTAINERS - METAL/GLASS/PAPER-0.8%
Crown Holdings, Inc. (a) 30,800 479,556
Owens-Illinois, Inc. (a) 34,900 584,924
Sonoco Products 28,700 908,355
----------
1,972,835
PAPER-0.8%
Kimberly-Clark Corp. 29,000 1,789,300
----------
4,401,239
SERVICES-1.3%
RAILROADS-1.3%
CSX CORP. 24,500 1,725,780
Norfolk Southern Corp. 27,050 1,439,601
----------
3,165,381
5
VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMODITIES-1.2%
CHEMICALS-1.2%
E.I. du Pont de Nemours
& Co. 21,100 $ 877,760
Eastman Chemical Co. 12,400 669,600
PPG Industries, Inc. 18,600 1,227,600
----------
2,774,960
DEFENSE-1.1%
DEFENSE-1.1%
Lockheed Martin Corp. 14,300 1,025,882
Northrop Grumman Corp. 25,000 1,601,500
----------
2,627,382
CONSUMER MANUFACTURING-0.3%
MISCELLANEOUS-0.3%
Bunge Ltd. 14,500 728,625
HEALTH CARE-0.3%
MEDICAL SERVICES-0.3%
AmerisourceBergen Corp. 16,600 695,872
INDUSTRIAL COMMODITIES-0.2%
PAPER-0.2%
Smurfit-Stone Container
Corp. (a) 51,900 567,786
Total Common Stocks
(cost $194,719,312) 227,127,822
SHORT-TERM INVESTMENT-4.1%
TIME DEPOSIT-4.1%
The Bank of New York
4.25%, 7/03/06
(cost $9,599,000) $ 9,599 9,599,000
TOTAL INVESTMENTS-100.3%
(cost $204,318,312) 236,726,822
Other assets less liabilities-(0.3%) (763,193)
------------
NET ASSETS-100% $235,963,629
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See Notes to Financial Statements.
6
VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $204,318,312) $236,726,822
Receivable for investment securities sold 769,542
Receivable for capital stock sold 369,676
Dividends and interest receivable 273,892
Total assets 238,139,932
LIABILITIES
Due to custodian 1,148
Payable for investment securities purchased 1,667,367
Payable for capital stock redeemed 247,827
Advisory fee payable 110,804
Distribution fee payable 50,255
Administrative fee payable 19,607
Transfer agent fee payable 130
Accrued expenses 79,165
Total liabilities 2,176,303
NET ASSETS $235,963,629
COMPOSITION OF NET ASSETS
Capital stock, at par $ 18,167
Additional paid-in capital 197,766,165
Undistributed net investment income 1,593,673
Accumulated net realized gain on investment transactions 4,177,114
Net unrealized appreciation of investments 32,408,510
------------
$235,963,629
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 515,740 39,405 $13.09
B $235,447,889 18,127,928 $12.99
See Notes to Financial Statements.
7
VALUE PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $8,444) $ 2,522,062
Interest 160,571
Total investment income 2,682,633
EXPENSES
Advisory fee 600,591
Distribution fee--Class B 272,466
Transfer agency--Class A 2
Transfer agency--Class B 1,279
Custodian 63,678
Printing 48,139
Administrative 39,000
Audit 20,248
Legal 4,697
Directors' fees 638
Miscellaneous 5,424
Total expenses 1,056,162
Net investment income 1,626,471
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 4,208,002
Net change in unrealized appreciation/depreciation of investments 4,252,992
Net gain on investment transactions 8,460,994
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,087,465
See Notes to Financial Statements.
8
VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
--------------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,626,471 $ 2,258,562
Net realized gain on investment transactions 4,208,002 6,469,868
Net change in unrealized appreciation/
depreciation of investments 4,252,992 449,217
Net increase in net assets from operations 10,087,465 9,177,647
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
CLASS A (5,912) (184)
Class B (2,258,458) (1,908,445)
Net realized gain on investment transactions
Class A (14,248) (222)
Class B (6,433,182) (2,681,802)
CAPITAL STOCK TRANSACTIONS
Net increase 42,713,833 35,488,418
Total increase 44,089,498 40,075,412
NET ASSETS
Beginning of period 191,874,131 151,798,719
End of period (including undistributed net
investment income of $1,593,673 and
$2,231,572, respectively) $235,963,629 $191,874,131
See Notes to Financial Statements.
9
VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Value Portfolio (the "Portfolio") is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is to seek long-term growth of capital. The
Portfolio commenced operations on May 1, 2001. The Portfolio is diversified as
defined under the Investment Company Act of 1940. The Fund was incorporated in
the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly. The
Adviser has agreed to waive its fees and bear certain expenses to the extent
necessary to limit total operating expenses on an annual basis to 1.20% and
1.45% of the daily average net assets for Class A and Class B shares,
respectively. For the six months ended June 30, 2006 there were no such
expenses waived by the Adviser.
11
VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $23,340, none of which was paid to Sanford C.
Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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
Investment Inc. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
Investment securities (excluding U.S. government
securities) $52,466,398 $16,144,965
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $39,326,411
Gross unrealized depreciation (6,917,901)
-----------
Net unrealized appreciation $32,408,510
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 17,867 26,487 $ 243,258 $ 333,385
Shares issued in
reinvestment of
dividends and
distributions 1,554 33 20,160 406
Shares redeemed (2,483) (4,504) (33,073) (57,121)
Net increase 16,938 22,016 $ 230,345 $ 276,670
CLASS B
Shares sold 4,027,699 5,620,924 $ 53,827,054 $ 70,394,206
Shares issued in
reinvestment of
dividends and
distributions 675,341 376,250 8,691,640 4,590,247
Shares redeemed (1,499,727) (3,174,997) (20,035,206) (39,772,705)
Net increase 3,203,313 2,822,177 $ 42,483,488 $ 35,211,748
13
VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $2,208,016 $1,139,078
Net long-term capital gains 2,382,637 -0-
Total distributions paid $4,590,653 $1,139,078
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $2,421,697
Undistributed long-term capital gains 6,230,676
Unrealized appreciation/(depreciation) 28,151,259(a)
Total accumulated earnings/(deficit) $36,803,632
(a) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
investors based on (i) their aliquot share of losses suffered by the fund due
to market timing, and (ii) a proportionate share of advisory fees paid by such
fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds until December 31, 2008;
and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
15
VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
17
VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------------------------------------
SIX MONTHS JULY 22,
ENDED YEAR ENDED DECEMBER 31, 2002(b) TO
JUNE 30, 2006 ------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004(a) 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $12.94 $12.63 $11.20 $8.76 $8.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .12 .22(d) .25(d) .16(d) .07(d)
Net realized and unrealized gain
on investment transactions .57 .49 1.18 2.36 .69
Net increase in net asset value
from operations .69 .71 1.43 2.52 .76
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.16) (.18) -0- (.08) -0-
Distributions from net realized gain
on investment transactions (.38) (.22) -0- -0- -0-
Total dividends and distributions (.54) (.40) -0- (.08) -0-
Net asset value, end of period $13.09 $12.94 $12.63 $11.20 $8.76
TOTAL RETURN
Total investment return based on
net asset value (e) 5.31% 5.74% 12.77% 28.94% 9.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $515,740 $290,673 $5,699 $239 $187
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .71%(f)(g) .73% .79%(g) .99% 1.20%(g)
Expenses, before waivers and
reimbursements .71%(f)(g) .74% .98%(g) 1.06% 2.28%(g)
Net investment income 1.76%(f)(g) 1.74%(d) 2.02%(d)(g) 1.51%(d) 4.22%(d)(g)
Portfolio turnover rate 8% 21% 27% 27% 12%
See footnote summary on page 19.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------------
SIX MONTHS MAY 1,
ENDED YEAR ENDED DECEMBER 31, 2001(h) TO
JUNE 30, 2006 -------------------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $12.84 $12.54 $11.16 $8.75 $10.07 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (c) .10 .17(d) .17(d) .12(d) .12(d) .08(d)
Net realized and unrealized gain (loss)
on investment transactions .56 .50 1.31 2.36 (1.42) (.01)
Net increase (decrease) in net asset
value from operations .66 .67 1.48 2.48 (1.30) .07
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.13) (.15) (.10) (.07) (.02) -0-
Distributions from net realized gain
on investment transactions (.38) (.22) -0- -0- -0- -0-
Total dividends and distributions (.51) (.37) (.10) (.07) (.02) -0-
Net asset value, end of period $12.99 $12.84 $12.54 $11.16 $8.75 $10.07
TOTAL RETURN
Total investment return based
on net asset value (e) 5.16% 5.48% 13.37% 28.46% (12.95)% .70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $235,448 $191,583 $151,793 $117,561 $68,366 $27,286
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements .95%(f)(g) .98% .97% 1.24% 1.21% 1.20%(g)
Expenses, before waivers
and reimbursements .95%(f)(g) .99% 1.15% 1.33% 1.43% 2.47%(g)
Net investment income 1.50%(f)(g) 1.38%(d) 1.45%(d) 1.29%(d) 1.27%(d) 1.29%(d)(g)
Portfolio turnover rate 8% 21% 27% 27% 12% 4%
(a) There were no Class A shares outstanding for the period May 11, 2004
through October 3, 2004.
(b) Commencement of distribution.
(c) Based on average shares outstanding.
(d) Net of expenses waived or reimbursed by the Adviser.
(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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(g) Annualized.
(h) Commencement of operations.
19
VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Value Portfolio (the "Fund"), prepared by Philip L. Kirstein,
the Senior Officer, for the independent directors of the Fund, as required by
an August 2004 agreement between the Adviser and the New York State Attorney
General. The Senior Officer's evaluation of the investment advisory agreement
is not meant to diminish the responsibility or authority of the Board of
Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Value 55 bp on 1st $2.5 billion Value Portfolio
45 bp on next $2.5 billion
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Value Portfolio(3) $69,000 0.05%
1 It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board Of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
2 Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
3 The expense reimbursement has been waived by the Adviser.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's most recent fiscal year. The waiver is terminable by the Adviser on
May 1st of each year upon at least 60 days written notice. It should be noted
that the Fund was operating below its expense cap in the latest fiscal year;
accordingly, the expense limitation undertaking of that Fund was of no effect.
The gross expense ratios of the Fund during the most recently completed fiscal
year are also listed below.
EXPENSE CAP
PURSUANT TO GROSS
EXPENSE LIMITATION EXPENSE FISCAL
FUND UNDERTAKING RATIO YEAR END
- -------------------------------------------------------------------------------
Value Portfolio Class A 1.20% 0.98% December 31
Class B 1.45% 1.15%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
21
VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
EFFECTIVE
NET ASSETS ALLIANCE ALLIANCE
09/30/05 INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Value Portfolio $172.9 Diversified Value Schedule 0.408%
65 bp on 1st $25 m
50 bp on next $25 m
40 bp on next $50 m
30 bp on next $100 m
25 bp on the balance
MINIMUM ACCOUNT SIZE $20 m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(4)
- -------------------------------------------------------------------------------
Equity Value 0.80%
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
FUND ACITM MUTUAL FUND(5) FEE
- -------------------------------------------------------------------------------
Value Portfolio Bernstein Kokusai Value (Mizuho)(6) 0.30%
(4) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
(5) The name in parenthesis is the distributor of the fund.
(6) The ACITM fund is not a retail fund.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
Value Portfolio Client # 1 0.25% for first $500 million
0.20% thereafter
Client # 2(7) 0.50% on first $1 billion
0.40% on next $1 billion
0.30% on next $1 billion
0.20% thereafter
Client # 3 0.23% on first $300 million
0.20% thereafter
Client # 4 0.27% on first $300 million
0.16% on next $700 million
0.13% thereafter
Client # 5 0.20%
Client # 6 Base fee of
0.15% on first $1 billion
0.14% ON NEXT $2 BILLION
0.12% on next $2 billion
0.10% thereafter
+/- Performance Fee(8)
Client # 7 0.60% on first $10 million
0.50% on next $15 million
0.40% on next $25 million
0.30% on next $50 million
0.25% on next $50 million
0.225% on next $50 million
0.20% thereafter
0.47% on first $50 million
for first six months
Client #(8) 0.60% on first $10 million
0.50% on next $15 million
0.40% on next $25 million
0.30% on next $50 million
0.25% on next $50 million
0.225% on next $50 million
0.175% on next $50 million
0.15% thereafter
(7) This is the fee schedule of a fund managed by an affiliate of the
Adviser.
(8) The performance fee is calculated by multiplying the Base Fee during the
period by an adjustment factor that considers the excess or under performance
of the fund versus its benchmark, the Russell 1000 Value Index over a
cumulative 36-month period. The fund's annualized effective advisory fee rate
over the most recent four quarterly payments, including base fee plus
performance fee, is 0.15%.
23
VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser. In addition, to the extent that
certain of these sub-advisory relationships are with affiliates of the Adviser,
the fee schedules may not reflect arms-length bargaining or negotiations.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(9)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Value Portfolio 0.550 0.750 1/11
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(10) and Lipper Expense Universe(11). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(12) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Value Portfolio 0.789 0.853 11/34 0.829 3/11
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
(9) It should be noted that "effective management fee" is calculated by
Lipper using the Fund's contractual management fee rate at a hypothetical asset
level. The hypothetical asset level is based on the combined net assets of all
classes of the Fund, rounded up to the next $25 million. Lipper's total expense
ratio information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the fee waiver or expense reimbursement that effectively
reduce the contractual fee rates. In addition, the effective management fee
rate does not reflect
(10) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(11) Except for asset (size) comparability and load type, Lipper uses the
same criteria for selecting a Lipper Expense Group when selecting a Lipper
Expense Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe
allows for the same adviser to be represented by more than just one fund.
(12) Most recent fiscal year end Class A share total expense ratio.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund increased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12b-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Value Portfolio $328,189
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Value Portfolio $380,300
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(13) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
(13) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
25
VALUE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1 and 3 year performance rankings
of the Fund(14) relative to its Lipper Performance Group(15) and Lipper
Performance Universe(16) for the period ended September 30, 2005.
VALUE PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 8/11 20/34
3 year 3/11 15/33
(14) The performance rankings are for the Class A shares of the Fund.
(15) The Lipper Performance Group is identical to the Lipper Expense Group.
(16) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
26
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Set forth below are the 1, 3 year and since inception performance returns of
the Fund (in bold)(17) versus its benchmark(18).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR INCEPTION
- -------------------------------------------------------------------------------
VALUE PORTFOLIO 14.22 18.75 17.21
Russell 1000 Value Index 16.69 20.48 15.22
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(17) The performance returns are for the Class A shares of the Fund.
(18) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
27
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
GROWTH & INCOME PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
GROWTH & INCOME PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ------------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,012.83 $3.04 0.61%
Hypothetical (5% return before expenses) $1,000 $1,021.77 $3.06 0.61%
CLASS B
Actual $1,000 $1,011.72 $4.29 0.86%
Hypothetical (5% return before expenses) $1,000 $1,020.53 $4.31 0.86%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
GROWTH & INCOME PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Citigroup, Inc. $ 112,119,408 4.7%
American International Group, Inc. 96,475,890 4.1
Time Warner, Inc. 92,164,020 3.9
JPMorgan Chase & Co. 88,536,000 3.7
The Home Depot, Inc. 83,057,853 3.4
Bank of America Corp. 78,095,160 3.3
WellPoint, Inc. 77,965,778 3.3
Microsoft Corp. 75,783,250 3.2
News Corp. Cl. A 74,355,106 3.1
Fannie Mae 71,019,650 3.0
-------------- -----
$ 849,572,115 35.7%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Finance $ 637,371,353 26.8%
Consumer Services 357,373,125 15.0
Technology 316,797,167 13.3
Consumer Staples 221,248,799 9.3
Energy 203,275,044 8.5
Health Care 175,370,773 7.4
Capital Goods 158,354,398 6.7
Utilities 144,468,242 6.1
Transportation 72,677,493 3.0
Basic Industry 58,428,080 2.5
Consumer Manufacturing 4,857,741 0.2
-------------- -----
Total Investments* 2,350,222,215 98.8
Cash and receivables, net of liabilities 27,565,976 1.2
-------------- -----
Net Assets $2,377,788,191 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-98.8%
FINANCE-26.8%
BANKING - MONEY CENTER-5.0%
JPMorgan Chase & Co. 2,108,000 $ 88,536,000
The Bank of New York Co., Inc. 348,800 11,231,360
Wachovia Corp. 368,500 19,928,480
--------------
119,695,840
BANKING - REGIONAL-4.6%
Bank of America Corp. 1,623,600 78,095,160
Northern Trust Corp. 565,000 31,244,500
--------------
109,339,660
BROKERAGE & MONEY MANAGEMENT-1.4%
Merrill Lynch & Co., Inc. 267,400 18,600,344
The Goldman Sachs Group, Inc. 88,100 13,252,883
--------------
31,853,227
INSURANCE-8.0%
ACE Ltd. 673,900 34,092,601
American International Group, Inc. 1,633,800 96,475,890
Axis Capital Holdings Ltd. 1,355,700 38,786,577
Hartford Financial Services Group, Inc. 250,000 21,150,000
--------------
190,505,068
MORTGAGE BANKING-3.0%
Fannie Mae 1,476,500 71,019,650
MISCELLANEOUS-4.8%
AMBAC Financial Group, Inc. 35,000 2,838,500
Citigroup, Inc. 2,324,200 112,119,408
--------------
114,957,908
--------------
637,371,353
CONSUMER SERVICES-15.0%
BROADCASTING & CABLE-8.8%
Comcast Corp. Cl. A (a) 275,000 9,003,500
News Corp. Cl. A 3,876,700 74,355,106
Time Warner, Inc. 5,327,400 92,164,020
Viacom, Inc. Cl. B (a) 800,000 28,672,000
Westwood One, Inc. 650,000 4,875,000
--------------
209,069,626
RESTAURANT & LODGING-2.2%
Hilton Hotels Corp. 1,144,500 32,366,460
McDonald's Corp. 625,000 21,000,000
--------------
53,366,460
RETAIL - GENERAL MERCHANDISE-4.0%
Lowe's Cos., Inc. 195,800 11,879,186
The Home Depot, Inc. 2,320,700 83,057,853
--------------
94,937,039
--------------
357,373,125
TECHNOLOGY-13.3%
COMMUNICATION EQUIPMENT-1.1%
Cisco Systems, Inc. (a) 817,700 15,969,681
Motorola, Inc. 488,200 9,837,230
--------------
25,806,911
COMPUTER HARDWARE/STORAGE-5.8%
EMC Corp. (a) 2,776,900 30,462,593
International Business Machines Corp. (IBM) 860,500 66,103,610
Sun Microsystems, Inc. (a) 10,001,900 41,507,885
--------------
138,074,088
COMPUTER SERVICES-0.2%
Fiserv, Inc. (a) 128,600 5,833,296
SEMICONDUCTOR CAPITAL EQUIPMENT-1.8%
Applied Materials, Inc. 2,567,700 41,802,156
SEMICONDUCTOR COMPONENTS-1.0%
Advanced Micro Devices, Inc. (a) 670,400 16,371,168
NVIDIA Corp. (a) 400,000 8,516,000
--------------
24,887,168
SOFTWARE-3.4%
BEA Systems, Inc. (a) 352,200 4,610,298
Microsoft Corp. 3,252,500 75,783,250
--------------
80,393,548
--------------
316,797,167
CONSUMER STAPLES-9.3%
HOUSEHOLD PRODUCTS-1.6%
The Procter & Gamble Co. 662,700 36,846,120
RETAIL - FOOD & DRUG-0.4%
CVS Corp. 334,200 10,259,940
TOBACCO-4.8%
Altria Group, Inc. 896,000 65,793,280
Loews Corp. 625,800 22,184,610
Loews Corp.-Carolina Group 526,000 27,020,620
--------------
114,998,510
3
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
MISCELLANEOUS-2.5%
Fortune Brands, Inc. 832,900 $ 59,144,229
--------------
221,248,799
ENERGY-8.5%
DOMESTIC PRODUCERS-1.6%
Noble Energy, Inc. 806,700 37,801,962
INTERNATIONAL-4.3%
Chevron Corp. 619,200 38,427,552
Exxon Mobil Corp. 1,040,400 63,828,540
--------------
102,256,092
OIL SERVICE-1.9%
Baker Hughes, Inc. 141,200 11,557,220
GlobalSantaFe Corp. 22,600 1,305,150
Nabors Industries Ltd. (a) 969,900 32,772,921
--------------
45,635,291
MISCELLANEOUS-0.7%
ConocoPhillips 268,300 17,581,699
--------------
203,275,044
HEALTH CARE-7.4%
BIOTECHNOLOGY-0.3%
Amgen, Inc. (a) 120,300 7,847,169
DRUGS-3.6%
Eli Lilly & Co. 220,000 12,159,400
Forest Laboratories, Inc. (a) 250,000 9,672,500
Merck & Co., Inc. 582,800 21,231,404
Pfizer, Inc. 1,300,000 30,511,000
Wyeth 274,200 12,177,222
--------------
85,751,526
MEDICAL SERVICES-3.5%
UnitedHealth Group, Inc. 85,000 3,806,300
WellPoint, Inc. (a) 1,071,400 77,965,778
--------------
81,772,078
--------------
175,370,773
CAPITAL GOODS-6.7%
ELECTRICAL EQUIPMENT-1.6%
Emerson Electric Co. 450,800 37,781,548
MACHINERY-0.5%
ITT Corp. 226,300 11,201,850
MISCELLANEOUS-4.6%
General Electric Co. 1,626,500 53,609,440
Illinois Tool Works, Inc. 348,800 16,568,000
United Technologies Corp. 618,000 39,193,560
--------------
109,371,000
--------------
158,354,398
UTILITIES-6.1%
ELECTRIC & GAS UTILITY-0.8%
FirstEnergy Corp. 335,000 18,160,350
TELEPHONE UTILITY-5.3%
AT&T, Inc. 2,203,500 61,455,615
BellSouth Corp. 472,900 17,118,980
Verizon Communications, Inc. 1,425,300 47,733,297
--------------
126,307,892
--------------
144,468,242
TRANSPORTATION-3.0%
AIR FREIGHT-2.4%
United Parcel Service, Inc. Cl. B 702,100 57,803,893
RAILROAD-0.6%
Union Pacific Corp. 160,000 14,873,600
--------------
72,677,493
BASIC INDUSTRY-2.5%
CHEMICALS-2.5%
Air Products & Chemicals, Inc. 849,000 54,268,080
E.I. du Pont de Nemours & Co. 100,000 4,160,000
--------------
58,428,080
CONSUMER MANUFACTURING-0.2%
TEXTILE PRODUCTS-0.2%
Building Material Holding Corp. 174,300 4,857,741
Total Common Stocks
(cost $2,143,121,874) 2,350,222,215
SHORT-TERM INVESTMENT-0.8%
TIME DEPOSIT-0.8%
The Bank of New York
4.25%, 7/03/06
(cost $17,976,000) $17,976 17,976,000
TOTAL INVESTMENTS-99.6%
(cost $2,161,097,874) 2,368,198,215
Other assets less liabilities-0.4% 9,589,976
NET ASSETS-100% $2,377,788,191
(a) Non-income producing security.
See Notes to Financial Statements.
4
GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $2,161,097,874) $ 2,368,198,215
Cash 985
Receivable for capital stock sold 11,177,957
Receivable for investment securities sold 5,894,607
Dividends and interest receivable 2,299,236
Total assets 2,387,571,000
LIABILITIES
Payable for investment securities purchased 5,503,796
Payable for capital stock redeemed 2,376,776
Advisory fee payable 1,130,017
Distribution fee payable 403,574
Administrative fee payable 19,607
Transfer agent fee payable 111
Accrued expenses 348,928
Total liabilities 9,782,809
NET ASSETS $ 2,377,788,191
COMPOSITION OF NET ASSETS
Capital stock, at par $ 101,923
Additional paid-in capital 2,085,260,154
Undistributed net investment income 14,276,402
Accumulated net realized gain on investment transactions 71,049,371
Net unrealized appreciation of investments 207,100,341
$ 2,377,788,191
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 513,796,592 21,882,433 $23.48
B $1,863,991,599 80,040,333 $23.29
See Notes to Financial Statements.
5
GROWTH & INCOME PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 24,732,239
Interest 374,379
Total investment income 25,106,618
EXPENSES
Advisory fee 7,026,863
Distribution fee--Class B 2,532,357
Transfer agency--Class A 1,458
Transfer agency--Class B 5,466
Printing 697,330
Custodian 144,875
Legal 71,535
Administrative 39,000
Audit 20,247
Directors' fees 2,389
Miscellaneous 87,968
Total expenses 10,629,488
Net investment income 14,477,130
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investment transactions 79,654,542(a)
Net change in unrealized appreciation/depreciation
of Investments (53,403,197)
Net gain on investment transactions 26,251,345
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 40,728,475
(a) On May 1, 2006, the Fund had a redemption-in-kind with total proceeds in
the amount of $153,473,337. The gain on investments of $13,792,121 will not be
realized for tax purposes.
See Notes to Financial Statements.
6
GROWTH & INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 14,477,130 $ 29,417,192
Net realized gain on investment
transactions 79,654,542 283,236,433
Net change in unrealized
appreciation/depreciation
of investments (53,403,197) (195,422,198)
Net increase in net assets from
operations 40,728,475 117,231,427
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (7,445,666) (8,911,022)
Class B (21,954,052) (26,654,854)
Net realized gain on investment
transactions
Class A (27,071,472) -0-
Class B (98,572,219) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (152,961,530) (109,030,745)
Total decrease (267,276,464) (27,365,194)
NET ASSETS
Beginning of period 2,645,064,655 2,672,429,849
End of period (including undistributed
net investment income of $14,276,402
and $29,198,990, respectively) $2,377,788,191 $2,645,064,655
See Notes to Financial Statements.
7
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Growth & Income Portfolio (the "Portfolio") is a series
of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's investment objective was to seek reasonable
current income and reasonable opportunity for appreciation through investments
primarily in dividend-paying, common stocks of good quality. The Portfolio is
diversified as defined under the Investment Company Act of 1940. The Fund was
incorporated in the State of Maryland on November 17, 1987, as an open-end
series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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
8
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
interim and may materially affect the value of those securities. To account for
this, the Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. Dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. 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 securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Portfolio amortizes premiums and accretes discounts as adjustments to interest
income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, under the
terms of an investment advisory agreement, the Portfolio paid the Adviser an
advisory fee at an annual rate of .625% of the Portfolio's average daily net
assets. The fee is accrued daily and paid monthly.
9
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006 amounted to $1,982,231, of which $271,672 and $0, respectively,
was paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 796,183,384 $1,073,650,443
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $ 278,891,812
Gross unrealized depreciation (71,791,471)
Net unrealized appreciation $ 207,100,341
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
11
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,297,345 4,893,371 $ 32,056,007 $ 118,926,296
Shares issued
in reinvestment
of dividends and
distributions 1,481,422 374,098 34,517,138 8,911,021
Shares redeemed (3,865,352) (8,360,399) (98,257,800) (200,754,368)
Net decrease (1,086,585) (3,092,930) $ (31,684,655) $ (72,917,051)
CLASS B
Shares sold 3,643,590 9,256,122 $ 86,946,698 $ 221,922,437
Shares issued
in reinvestment
of dividends and
distributions 5,215,330 1,127,532 120,526,271 26,654,855
Shares redeemed (12,943,285) (11,912,162) (328,749,844) (284,690,986)
Net decrease (4,084,365) (1,528,508) $(121,276,875) $ (36,113,694)
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 35,565,876 $ 19,250,194
Total taxable distributions 35,565,876 19,250,194
Total distributions paid $ 35,565,876 $ 19,250,194
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 29,198,990
Undistributed long-term capital gains 125,594,997(a)
Unrealized appreciation/(depreciation) 251,947,061(b)
Total accumulated earnings/(deficit) $ 406,741,048
(a) On December 31, 2005, the Portfolio had no net capital loss carryforwards.
During the current fiscal year the Portfolio utilized capital loss
carryforwards of $159,256,387.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance
13
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
defendants failed to disclose that they improperly allowed certain hedge funds
and other unidentified parties to engage in "late trading" and "market timing"
of AllianceBernstein Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Sections 206
and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of
compensatory damages and rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
15
GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ --------- ------------
Net asset value,
beginning of period $24.88 $24.08 $21.80 $16.62 $22.16 $23.15
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (a) .17 .31 .36(b) .23 .22 .21
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .14 .85 2.12 5.15 (5.01) (.05)
Net increase (decrease) in
net asset value from
operations .31 1.16 2.48 5.38 (4.79) .16
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.37) (.36) (.20) (.20) (.12) (.14)
Distributions from net
realized gain on investment
transactions (1.34) -0- -0- -0- (.63) (1.01)
Total dividends and
distributions (1.71) (.36) (.20) (.20) (.75) (1.15)
Net asset value, end of period $23.48 $24.88 $24.08 $21.80 $16.62 $22.16
TOTAL RETURN
Total investment return based
on net asset value (c) 1.28% 4.86% 11.46% 32.50% (22.05)% .36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $513,796 $571,372 $627,689 $603,673 $456,402 $673,722
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .61%(d)(e) .59% .60% .66% .68% .67%
Expenses, before waivers and
reimbursements .61%(d)(e) .59% .65% .66% .68% .67%
Net investment income 1.34%(d)(e) 1.29% 1.62%(b) 1.25% 1.15% .95%
Portfolio turnover rate 31% 72% 50% 57% 69% 80%
See footnote summary on page 17.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 --------------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------- ----------- ------------
Net asset value,
beginning of period $24.65 $23.87 $21.62 $16.49 $22.03 $23.06
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (a) .13 .25 .31(b) .18 .17 .16
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions .15 .83 2.10 5.11 (4.98) (.05)
Net increase (decrease) in
net asset value from
operations .28 1.08 2.41 5.29 (4.81) .11
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income (.30) (.30) (.16) (.16) (.10) (.13)
Distributions from net realized
gain on investment
transactions (1.34) -0- -0- -0- (.63) (1.01)
Total dividends and
Distributions (1.64) (.30) (.16) (.16) (.73) (1.14)
Net asset value, end of period $23.29 $24.65 $23.87 $21.62 $16.49 $22.03
TOTAL RETURN
Total investment return based
on net asset value (c) 1.17% 4.60% 11.22% 32.18% (22.26)% .15%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,863,992 $2,073,693 $2,044,741 $1,671,671 $1,067,952 $889,394
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .86%(d)(e) .85% .85% .91% .93% .92%
Expenses, before waivers and
reimbursements .86%(d)(e) .85% .90% .91% .93% .92%
Net investment income 1.09%(d)(e) 1.05% 1.39%(b) .99% .91% .75%
Portfolio turnover rate 31% 72% 50% 57% 69% 80%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
17
GROWTH & INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Growth and Income Portfolio (the "Fund"), prepared by Philip
L. Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Value 55 bp on 1st $2.5 billion Growth and Income Portfolio
45 bp on next $2.5 billion
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Growth and Income Portfolio $69,000 0.01%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Growth and Income Portfolio Class A 0.65% December 31
Class B 0.90%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Growth and Income $2,608.2 Relative Value Schedule 0.261%
Portfolio 65 bp on 1st $25m
50 bp on next $25m
40 bp on next $50m
30 bp on next $100m
25 bp on the balance
Minimum account size $10m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Equity Value 0.80%
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
19
GROWTH & INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
Growth and Income Portfolio Client # 1 0.30% on first $1 billion
0.25% on next $500 million
0.20% thereafter
Client # 2(4) 0.30%
Client # 3(4) 0.60% on first $1 billion
0.55% on next $500 million
0.50% on next $500 million
0.45% on next $500 million
0.40% thereafter
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser. In addition, to the extent that
certain of these sub-advisory relationships are with affiliates of the Adviser,
the fee schedules may not reflect arms-length bargaining or negotiations.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Growth and Income Portfolio 0.542 0.551 6/12
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO(%)(8) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Growth and Income
Portfolio 0.599 0.854 6/38 0.665 4/12
Based on this analysis, the Fund has a more favorable ranking on a total
expense basis than it does on a management fee basis.
(4) This is the fee schedule of a fund managed by an affiliate of the Adviser.
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Growth and Income Portfolio $4,603,123
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Growth and Income Portfolio $1,727,386
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
21
GROWTH & INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
profitability of SCB's dealings with other similar third party clients. In the
ordinary course of business, SCB receives and pays liquidity rebates from
electronic communications networks ("ECNs") derived from trading for its
clients, including the Fund. These credits and charges are not being passed on
to any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(10) relative to its Lipper Performance Group(11) and
Lipper Performance Universe(12) for the period ended September 30, 2005.
GROWTH AND INCOME PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 11/12 29/36
3 year 5/12 16/33
5 year 4/10 9/23
10 year 1/8 1/10
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
GROWTH AND INCOME
PORTFOLIO 11.40 17.98 3.77 11.66 11.38
Russell 1000
Value Index 16.69 20.48 5.76 11.52 13.05
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
23
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(This page left intentionally blank.)
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN GROWTH PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
GROWTH PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
GROWTH PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $ 903.85 $4.20 0.89%
Hypothetical (5% return before expenses) $1,000 $1,020.38 $4.46 0.89%
CLASS B
Actual $1,000 $ 903.23 $5.38 1.14%
Hypothetical (5% return before expenses) $1,000 $1,019.14 $5.71 1.14%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
GROWTH PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Google, Inc. Cl. A $ 11,615,440 5.0%
Legg Mason, Inc. 10,479,456 4.6
Genentech, Inc. 10,388,599 4.5
WellPoint, Inc. 10,253,293 4.5
Apple Computer, Inc. 9,704,688 4.2
Schlumberger Ltd. 9,532,104 4.1
QUALCOMM, Inc. 8,586,600 3.7
The Goldman Sachs Group, Inc. 7,828,377 3.4
Lowe's Cos., Inc. 7,360,181 3.2
Advanced Micro Devices, Inc. 7,013,424 3.1
------------ -----
$ 92,762,162 40.3%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Technology $ 71,893,135 31.2%
Health Care 45,451,695 19.7
Finance 42,862,916 18.6
Consumer Services 32,887,815 14.3
Energy 11,157,303 4.8
Aerospace & Defense 6,685,787 2.9
Consumer Manufacturing 5,040,242 2.2
Capital Goods 4,249,899 1.9
Consumer Staples 3,771,112 1.6
Multi-Industry Companies 3,338,208 1.5
Basic Industry 1,557,515 0.7
------------ -----
Total Investments* 228,895,627 99.4
Cash and receivables, net of liabilities 1,464,469 0.6
------------ -----
Net Assets $230,360,096 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-99.4%
TECHNOLOGY-31.2%
COMMUNICATION EQUIPMENT-5.4%
Juniper Networks, Inc.(a) 101,700 $ 1,626,183
Motorola, Inc. 115,290 2,323,094
QUALCOMM, Inc. 214,290 8,586,600
------------
12,535,877
COMPUTER HARDWARE/STORAGE-4.2%
Apple Computer, Inc.(a) 169,900 9,704,688
COMPUTER PERIPHERALS-0.8%
Network Appliance, Inc.(a) 53,700 1,895,610
COMPUTER SERVICES-0.9%
Cognizant Technology Solutions Corp. Cl. A(a) 20,000 1,347,400
Euronet Worldwide, Inc.(a) 19,290 740,157
------------
2,087,557
INTERNET MEDIA-6.5%
Google, Inc. Cl. A(a) 27,700 11,615,440
Yahoo!, Inc.(a) 102,100 3,369,300
------------
14,984,740
SEMICONDUCTOR COMPONENTS-8.7%
Advanced Micro Devices, Inc.(a) 287,200 7,013,424
Broadcom Corp. Cl. A(a) 226,850 6,816,843
Marvell Technology Group Ltd.(a) 93,300 4,135,989
NVIDIA Corp.(a) 95,000 2,022,550
------------
19,988,806
SOFTWARE-1.8%
Autodesk, Inc.(a) 53,200 1,833,272
SAP AG (ADR) 42,400 2,226,848
------------
4,060,120
MISCELLANEOUS-2.9%
Amphenol Corp. Cl. A 118,580 6,635,737
------------
71,893,135
HEALTH CARE-19.7%
BIOTECHNOLOGY-6.8%
Affymetrix, Inc.(a) 41,800 1,070,080
Genentech, Inc.(a) 127,000 10,388,599
Gilead Sciences, Inc.(a) 71,960 4,257,154
------------
15,715,833
DRUGS-3.6%
Eli Lilly & Co. 41,500 2,293,705
Merck & Co., Inc. 78,900 2,874,327
Teva Pharmaceutical Industries Ltd. (ADR) 99,200 3,133,728
------------
8,301,760
MEDICAL PRODUCTS-1.5%
Alcon, Inc. 34,600 3,409,830
MEDICAL SERVICES-7.8%
Caremark Rx, Inc. 97,010 4,837,889
UnitedHealth Group, Inc. 65,500 2,933,090
WellPoint, Inc.(a) 140,900 10,253,293
------------
18,024,272
------------
45,451,695
FINANCE-18.6%
BANKING - MONEY CENTER-1.7%
JPMorgan Chase & Co. 92,400 3,880,800
BROKERAGE & MONEY MANAGEMENT-10.6%
Legg Mason, Inc. 105,300 10,479,456
Merrill Lynch & Co., Inc. 33,400 2,323,304
The Charles Schwab Corp. 146,800 2,345,864
The Goldman Sachs Group, Inc. 52,040 7,828,377
Greenhill & Co., Inc. 23,600 1,433,936
------------
24,410,937
INSURANCE-2.8%
American International Group, Inc. 109,790 6,483,100
MISCELLANEOUS-3.5%
Citigroup, Inc. 143,700 6,932,088
State Street Corp. 19,900 1,155,991
------------
8,088,079
------------
42,862,916
CONSUMER SERVICES-14.3%
ADVERTISING-0.7%
aQuantive, Inc.(a) 31,400 795,362
Getty Images, Inc.(a) 13,000 825,630
------------
1,620,992
APPAREL-1.0%
Coach, Inc.(a) 39,800 1,190,020
Under Armour, Inc. Cl. A(a) 26,950 1,148,609
------------
2,338,629
BROADCASTING & CABLE-1.6%
Comcast Corp. Cl. A(a) 109,900 3,598,126
RETAIL-GENERAL MERCHANDISE-6.4%
eBay, Inc.(a) 114,400 3,350,776
Lowe's Cos., Inc. 121,315 7,360,181
3
GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Coldwater Creek, Inc.(a) 28,820 $ 771,223
Dick's Sporting Goods, Inc.(a) 21,200 839,520
Kohl's Corp.(a) 42,380 2,505,506
------------
14,827,206
MISCELLANEOUS-4.6%
CB Richard Ellis Group, Inc. Cl. A(a) 151,200 3,764,880
Corporate Executive Board Co. 33,350 3,341,670
Iron Mountain, Inc.(a) 32,400 1,211,112
Strayer Education, Inc. 22,500 2,185,200
------------
10,502,862
------------
32,887,815
ENERGY-4.8%
OIL & GAS FIELD SERVICE-4.8%
Halliburton Co. 21,900 1,625,199
Schlumberger Ltd. 146,400 9,532,104
------------
11,157,303
AEROSPACE & DEFENSE-2.9%
AEROSPACE-2.4%
The Boeing Co. 67,720 5,546,945
DEFENSE ELECTRONICS-0.5%
L-3 Communications Holdings, Inc. 15,100 1,138,842
------------
6,685,787
CONSUMER MANUFACTURING-2.2%
BUILDING & RELATED-2.0%
NVR, Inc.(a) 7,450 3,659,813
Toll Brothers, lnc.(a) 38,400 981,888
------------
4,641,701
TEXTILE PRODUCTS-0.2%
Building Materials Holding Corp. 14,300 398,541
------------
5,040,242
CAPITAL GOODS-1.9%
ELECTRICAL EQUIPMENT-0.6%
Emerson Electric Co. 15,900 1,332,579
MISCELLANEOUS-1.3%
United Technologies Corp. 46,000 2,917,320
------------
4,249,899
CONSUMER STAPLES-1.6%
HOUSEHOLD PRODUCTS-1.0%
The Procter & Gamble Co. 41,900 2,329,640
RETAIL- FOOD & DRUG-0.6%
Whole Foods Market, Inc. 22,300 1,441,472
------------
3,771,112
MULTI-INDUSTRY COMPANIES-1.5%
Danaher Corp. 51,900 3,338,208
BASIC INDUSTRY-0.7%
CHEMICALS-0.7%
Monsanto Co. 18,500 1,557,515
Total Common Stocks
(cost $186,953,730) 228,895,627
SHORT-TERM INVESTMENT-0.5%
TIME DEPOSIT-0.5%
The Bank of New York
4.25%, 7/03/06
(cost $1,166,000) $ 1,166 1,166,000
TOTAL INVESTMENTS-99.9%
(cost $188,119,730) 230,061,627
Other assets less liabilities-0.1% 298,469
NET ASSETS-100% $230,360,096
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See Notes to Financial Statements.
4
GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $188,119,730) $ 230,061,627
Cash 462
Receivable for investment securities sold 2,084,768
Receivable for capital stock sold 330,830
Dividends and interest receivable 108,831
Total assets 232,586,518
LIABILITIES
Payable for investment securities purchased 1,813,578
Advisory fee payable 156,061
Distribution fee payable 30,084
Payable for capital stock redeemed 24,777
Administrative fee payable 19,607
Transfer agent fee payable 123
Accrued expenses 182,192
Total liabilities 2,226,422
NET ASSETS $ 230,360,096
COMPOSITION OF NET ASSETS
Capital stock, at par $ 12,563
Additional paid-in capital 279,328,748
Net investment loss (497,279)
Accumulated net realized loss on investment transactions (90,425,833)
Net unrealized appreciation of investments 41,941,897
$ 230,360,096
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 98,748,791 5,330,970 $18.52
B $131,611,305 7,231,577 $18.20
See Notes to Financial Statements.
5
GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $11,697) $ 923,148
Interest 41,210
Total investment income 964,358
EXPENSES
Advisory fee 1,039,910
Distribution fee--Class B 201,903
Transfer agency--Class A 853
Transfer agency--Class B 1,207
Printing 75,672
Custodian 65,395
Administrative 39,000
Audit 20,248
Legal 7,623
Directors' fees 672
Miscellaneous 9,154
Total expenses 1,461,637
Net investment loss (497,279)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 19,841,761
Net change in unrealized appreciation/depreciation of
investments (45,656,075)
Net loss on investment transactions (25,814,314)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (26,311,593)
See Notes to Financial Statements.
6
GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment loss $ (497,279) $ (1,567,900)
Net realized gain on investment
transactions 19,841,761 31,913,461
Net change in unrealized
appreciation/depreciation of
investments (45,656,075) 224,967
Net increase (decrease) in net
assets from operations (26,311,593) 30,570,528
CAPITAL STOCK TRANSACTIONS
Net decrease (34,458,221) (29,684,827)
Total increase (decrease) (60,769,814) 885,701
NET ASSETS
Beginning of period 291,129,910 290,244,209
End of period (including net
investment loss of ($497,279)
and $0, respectively) $ 230,360,096 $ 291,129,910
See Notes to Financial Statements.
7
GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Growth Portfolio (the "Portfolio") is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's investment objective was to seek to provide
long-term growth of capital. Current income was incidental to the Portfolio's
objective. The Portfolio is diversified as defined under the Investment Company
Act of 1940. The Fund was incorporated in the State of Maryland on November 17,
1987, as an open-end series investment company. The Fund offers twenty-three
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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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
8
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
interim and may materially affect the value of those securities. To account for
this, the Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. 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 securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Portfolio amortizes premiums and accretes discounts as adjustments to interest
income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
9
GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $15,527 of which $3,316 and $0, respectively, was
paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 82,893,073 $ 113,103,882
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $ 48,740,160
Gross unrealized depreciation (6,798,263)
Net unrealized appreciation $ 41,941,897
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) call options and purchase put options on U.S. securities and foreign
currencies that are traded on U.S. securities exchanges and over-the-counter
markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 130,765 257,660 $ 2,676,549 $ 4,929,540
Shares redeemed (829,602) (1,731,181) (16,766,851) (31,847,558)
Net decrease (698,837) (1,473,521) $ (14,090,302) $ (26,918,018)
CLASS B
Shares sold 340,339 1,576,527 $ 6,874,455 $ 28,719,338
Shares redeemed (1,424,605) (1,731,169) (27,242,374) (31,486,147)
Net decrease (1,084,266) (154,642) $ (20,367,919) $ (2,766,809)
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
11
GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN 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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT)
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. As of December
31, 2005, the components of accumulated earnings/(deficit) on a tax basis were
as follows:
Accumulated capital and other losses $ (110,096,706)(a)
Unrealized appreciation/(depreciation) 87,427,084(b)
Total accumulated earnings/(deficit) $ (22,669,622)
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$110,096,706 of which $10,861,885 expires in the year 2009, $84,319,349 expires
in the year 2010 and $14,915,472 expires in the year 2011. To the extent future
capital gains are offset by capital loss carryforwards, such gains will not be
distributed. During the current fiscal year, the Portfolio utilized capital
loss carryforwards of $31,870,988.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the tax treatment of dividends received.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in
13
GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
the Adviser's sponsored mutual funds. The Adviser responded to the Information
Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
14
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ------------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ ---------- ------------
Net asset value,
beginning of period $20.49 $18.30 $15.95 $11.81 $16.42 $25.10
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss (a) (.02) (.08) (.07) (.06) (.06) (.06)
Net realized and unrealized
gain (loss) on investment
transactions (1.95) 2.27 2.42 4.20 (4.55) (5.47)
Net increase (decrease) in
net asset value from
operations (1.97) 2.19 2.35 4.14 (4.61) (5.53)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income -0- -0- -0- -0- -0- (.06)
Distributions from net
realized gain on investment
transactions -0- -0- -0- -0- -0- (1.85)
Distributions in excess of net
realized gain on investment
transactions -0- -0- -0- -0- -0- (1.23)
Return of capital -0- -0- -0- -0- -0- (.01)
Total dividends and
Distributions -0- -0- -0- -0- -0- (3.15)
Net asset value, end of period $18.52 $20.49 $18.30 $15.95 $11.81 $16.42
TOTAL RETURN
Total investment return based
on net asset value (b) (9.62)% 11.97% 14.73% 35.06% (28.08)% (23.47)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $98,749 $123,535 $137,345 $141,809 $121,439 $226,237
Ratio to average net assets of:
Expenses .89%(c)(d) .88% .88% .89% .88% .85%
Net investment loss (.20)%(c)(d) (.43)% (.43)% (.43)% (.44)% (.31)%
Portfolio turnover rate 30% 49% 56% 49% 38% 104%
See footnote summary on page 16.
15
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ------------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ ---------- ------------
Net asset value,
beginning of period $20.15 $18.05 $15.76 $11.70 $16.31 $24.99
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss (a) (.05) (.12) (.11) (.09) (.09) (.11)
Net realized and unrealized
gain (loss) on investment
transactions (1.90) 2.22 2.40 4.15 (4.52) (5.44)
Net increase (decrease) in
net asset value from
operations (1.95) 2.10 2.29 4.06 (4.61) (5.55)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income -0- -0- -0- -0- -0- (.04)
Distributions from net realized
gain on investment
transactions -0- -0- -0- -0- -0- (1.85)
Distributions in excess of
net realized gain on
investment transactions -0- -0- -0- -0- -0- (1.23)
Return of capital -0- -0- -0- -0- -0- (.01)
Total dividends and
Distributions -0- -0- -0- -0- -0- (3.13)
Net asset value, end of period $18.20 $20.15 $18.05 $15.76 $11.70 $16.31
TOTAL RETURN
Total investment return based
on net asset value (b) (9.68)% 11.64% 14.53% 34.70% (28.26)% (23.65)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $131,611 $167,595 $152,899 $120,460 $71,724 $94,215
Ratio to average net assets of:
Expenses 1.14%(c)(d) 1.13% 1.13% 1.14% 1.13% 1.11%
Net investment loss (.45)%(c)(d) (.68)% (.68)% (.68)% (.69)% (.59)%
Portfolio turnover rate 30% 49% 56% 49% 38% 104%
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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.
(c) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(d) Annualized.
16
GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Growth Portfolio (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003, is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Growth 75 bp on 1st $2.5 billion Growth Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Growth Portfolio $69,000 0.02%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
17
GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Growth Portfolio Class A 0.88% December 31
Class B 1.13%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Growth Portfolio $280.5 Growth Schedule 0.366%
80 bp on 1st $25m
50 bp on next $25m
40 bp on next $50m
30 bp on next $100m
25 bp on the balance
minimum account size $10m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a substantially similar
investment style as the Fund:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Equity Growth 0.80%
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fee for the following sub-advisory relationship:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
Growth Portfolio Client # 1 0.25%
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Growth Portfolio 0.750 0.750 6/13
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO(%)(7) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Growth Portfolio 0.884 0.858 22/39 0.888 6/13
Based on this analysis, the Fund has equally favorable rankings on management
fees compared to total expenses.
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
(4) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(5) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(6) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(7) Most recent fiscal year end Class A share total expense ratio.
19
GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Growth Portfolio $348,513
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Growth Portfolio $502,703
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(8) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
(8) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(9) relative to its Lipper Performance Group(10) and Lipper
Performance Universe(11) for the period ended September 30, 2005.
GROWTH PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 5/13 14/38
3 year 4/12 15/36
5 year 3/11 14/32
10 year 3/4 10/16
(9) The performance rankings are for the Class A shares of the Fund.
(10) The Lipper Performance Group is identical to the Lipper Expense Group.
(11) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
21
GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(12) versus its benchmark(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
Growth Portfolio 19.89 18.67 -4.68 8.24 10.75
Russell 3000
Growth Index 14.57 18.13 -0.72 9.54 11.20
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(12) The performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
22
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AllianceBernstein
Variable Products Series Fund, Inc.
Semi-Annual Report
June 30, 2006
> AllianceBernstein International Research Growth Portfolio
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernsteinR and the AB Logo are registered trademarks and service marks
used by permission of the owner, AllianceBernstein L.P.
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
Hypothetical Example for Comparison Purposes
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 Ending
Account Value Account Value Expenses Paid Annualized
International Research Growth Portfolio January 1, 2006 June 30, 2006 During Period* Expense Ratio*
- -------------------------------------------------------------------------------------------------------------
Class A
Actual $1,000 $1,083.57 $6.30 1.22%
Hypothetical (5% return before
expenses) $1,000 $1,018.74 $6.11 1.22%
Class B
Actual $1,000 $1,081.72 $7.59 1.47%
Hypothetical (5% return before
expenses) $1,000 $1,017.50 $7.35 1.47%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
BNP Paribas, SA $2,383,149 3.1%
UBS AG 2,263,960 2.9
Credit Suisse Group 2,084,226 2.7
Nabors Industries Ltd. 1,655,710 2.1
Rio Tinto Plc 1,599,640 2.1
Norsk Hydro ASA 1,587,354 2.1
Roche Holding AG 1,512,834 2.0
Novartis AG 1,489,313 1.9
HSBC Holdings Plc 1,439,747 1.9
Nomura Holdings, Inc. 1,423,560 1.8
----------- ------
$17,439,493 22.6%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Finance $22,325,153 29.0%
Energy 8,363,857 10.9
Health Care 7,537,283 9.8
Technology 6,799,856 8.8
Consumer Services 5,938,427 7.7
Capital Goods 5,840,689 7.6
Consumer Staples 5,161,683 6.7
Consumer Manufacturing 5,041,700 6.5
Basic Industry 4,707,370 6.1
Utilities 1,830,143 2.4
Aerospace & Defense 778,226 1.0
Multi-Industry Companies 777,637 1.0
Transportation 159,406 0.2
----------- ------
Total Investments* 75,261,430 97.7
Cash and receivables, net of liabilities 1,775,569 2.3
----------- ------
Net Assets $77,036,999 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
COUNTRY DIVERSIFICATION
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PERCENT OF
COUNTRY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Japan $13,145,012 17.1%
United Kingdom 11,462,615 14.9
Switzerland 11,281,017 14.6
France 9,069,158 11.8
Netherlands 2,761,816 3.6
Australia 2,750,598 3.6
Italy 2,299,942 3.0
Germany 2,184,698 2.8
Ireland 2,085,466 2.7
Brazil 1,961,072 2.5
Spain 1,815,623 2.4
Bermuda 1,655,710 2.1
Norway 1,587,354 2.1
Cayman Islands 1,328,250 1.7
Sweden 1,270,912 1.6
South Korea 1,150,257 1.5
Canada 1,148,107 1.5
Russia 970,860 1.3
Taiwan 956,667 1.2
China 914,744 1.2
Other* 3,461,552 4.5
----------- ------
Total Investments** 75,261,430 97.7
Cash and receivables, net of liabilities 1,775,569 2.3
----------- ------
Net Assets $77,036,999 100.0%
* The Portfolio's country breakdown is expressed as a percentage of net assets
and may vary over time. "Other" represents less than 1% weightings in the
following countries: Austria, Egypt, Greece, Hong Kong, Hungary, India, Israel,
Mexico and Turkey.
** Excludes short-term investments.
3
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
COMMON & PREFERRED
STOCKS-97.7%
FINANCE-29.0%
BANKING-
MONEY CENTER-17.7%
Anglo Irish Bank Corp. Plc 46,991 $729,836
Banco Bilbao Vizcaya
Argentaria, SA 38,072 783,418
BNP Paribas, SA 24,922 2,383,149
Commerzbank AG 16,361 592,420
Credit Suisse Group 37,357 2,084,226
HSBC Holdings Plc 81,826 1,439,747
Kookmin Bank 6,510 536,373
Mitsubishi UFJ Financial
Group, Inc. 93 1,303,668
Standard Chartered Plc 29,523 720,361
Sumitomo Mitsui Financial
Group, Inc. 78 826,007
UBS AG 20,682 2,263,960
-----------
13,663,165
BANKING-
REGIONAL-2.7%
Allied Irish Banks Plc 13,317 320,054
Turkiye Is Bankasi 79,525 385,971
UniCredito Italiano SpA 173,142 1,354,159
-----------
2,060,184
BROKERAGE & MONEY
MANAGEMENT-3.2%
Man Group Plc 18,176 855,666
Nomura Holdings, Inc. 75,800 1,423,560
Partners Group (a) 2,651 172,389
-----------
2,451,615
INSURANCE-5.0%
ING Groep N.V. 30,152 1,183,694
Prudential Plc 80,382 908,956
QBE Insurance Group Ltd. 77,209 1,173,798
Swiss Reinsurance 8,120 566,526
-----------
3,832,974
MISCELLANEOUS-0.4%
ORIX Corp. 1,300 317,215
-----------
22,325,153
ENERGY-10.9%
INTERNATIONAL-4.6%
ENI S.p.A 13,905 408,431
LUKOIL (ADR) 8,134 680,002
Norsk Hydro ASA 59,850 1,587,354
Petroleo Brasileiro, SA
(ADR) (a) 10,600 846,304
-----------
3,522,091
OIL SERVICE-6.3%
GlobalSantaFe Corp. 23,000 1,328,250
Nabors Industries Ltd. (a) 49,000 1,655,710
Petro-Canada 24,200 1,148,107
Schlumberger Ltd. 10,900 709,699
-----------
4,841,766
-----------
8,363,857
HEALTH CARE-9.8%
DRUGS-7.6%
Chugai Pharmaceutical Co.,
Ltd. 18,100 369,584
Gedeon Richter Rt 1,400 257,316
Novartis AG 27,597 1,489,313
Roche Holding AG 9,168 1,512,834
Sanofi-Aventis, SA 14,025 1,366,463
Takeda Pharmaceutical Co.,
Ltd. 7,900 491,756
Teva Pharmaceutical
Industries Ltd. (ADR) 11,900 375,921
-----------
5,863,187
MEDICAL PRODUCTS-2.2%
Essilor International, SA 7,637 768,151
Nobel Biocare Holding AG 2,385 565,321
Smith & Nephew Plc 296 2,272
Synthes, Inc. 2,810 338,352
-----------
1,674,096
-----------
7,537,283
TECHNOLOGY-8.8%
COMMUNICATION
EQUIPMENT-0.4%
Tim Participacoes, SA (ADR) 6,400 176,320
Vimpel-Communications
OAO (ADR) (a) 3,400 155,788
-----------
332,108
COMMUNICATION
SERVICES-0.2%
Comstar United Telesystems
(GDR) (b) 23,288 135,070
COMPUTER HARDWARE/
STORAGE-0.6%
NEC Corp. 95,000 506,681
COMPUTER
SERVICES-1.3%
CapGemini, SA 17,458 995,610
INTERNET
INFRASTRUCTURE-0.7%
Fastweb (a) 12,375 537,352
SEMICONDUCTOR
CAPITAL EQUIP-0.7%
ASML Holding NV (a) 25,806 521,815
4
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
SEMICONDUCTOR
COMPONENTS-0.8%
Hynix Semiconductor, Inc.
(GDR) (a)(b) 1,200 $38,895
Hynix Semiconductor, Inc. (a) 17,790 574,989
-----------
613,884
SOFTWARE-1.2%
SAP AG 4,424 929,560
MISCELLANEOUS-2.9%
Canon, Inc. 21,300 1,043,899
HOYA Corp. 17,200 612,322
Keyence Corp. 2,240 571,555
-----------
2,227,776
-----------
6,799,856
CONSUMER
SERVICES-7.7%
ADVERTISING-0.5%
WPP Group Plc 30,199 365,049
AIRLINES-0.9%
easyJet Plc (a) 102,756 733,944
BROADCASTING &
CABLE-1.3%
Grupo Televisa S.A. (ADR) 16,800 324,408
Societe Television Francaise 1 20,431 665,657
-----------
990,065
CELLULAR
COMMUNICATIONS-1.9%
America Movil, SA de CV
Series L (ADR) 10,600 352,556
Bharti Airtel Ltd. (a) 22,964 184,888
Orascom Telecom Holding
SAE (GDR) 4,148 169,238
Vodafone Group Plc 356,797 759,391
-----------
1,466,073
ENTERTAINMENT &
LEISURE-1.3%
OPAP, SA 13,412 487,418
ProSiebenSat.1 Media AG
pfd. 20,628 514,880
-----------
1,002,298
RESTAURANTS &
LODGING-0.8%
Accor, SA 10,078 613,101
MISCELLANEOUS-1.0%
First Choice Holidays Plc 75,189 317,555
Li & Fung Ltd. 222,200 450,342
-----------
767,897
-----------
5,938,427
CAPITAL GOODS-7.6%
ELECTRICAL
EQUIPMENT-2.8%
Atlas Copco AB Cl. A 38,936 1,084,238
Delta Electronics, Inc. 148,900 422,257
Koninklijke Philips
Electronics NV 11,126 346,608
Yamada Denki Co., Ltd. 3,500 356,598
-----------
2,209,701
ENGINEERING &
CONSTRUCTION-2.8%
ABB Ltd. 75,584 981,384
WorleyParsons Ltd. 77,600 1,160,366
-----------
2,141,750
MACHINERY-1.4%
KOMATSU Ltd. 53,000 1,054,646
MISCELLANEOUS-0.6%
Nitto Denko Corp. 6,100 434,592
-----------
5,840,689
CONSUMER
STAPLES-6.7%
BEVERAGES-1.4%
Pernod-Ricard, SA 2,617 518,324
SABMiller Plc 30,976 557,646
-----------
1,075,970
FOOD-1.7%
Nestle, SA 4,168 1,306,712
RETAIL - FOOD &
DRUG-1.3%
Carrefour, SA 6,400 374,849
Tesco Plc 98,283 606,705
-----------
981,554
TOBACCO-1.3%
Altadis, SA 9,137 431,445
British American Tobacco Plc 23,764 598,313
-----------
1,029,758
MISCELLANEOUS-1.0%
Punch Taverns Plc 47,509 767,689
-----------
5,161,683
CONSUMER
MANUFACTURING-6.5%
AUTO & RELATED-2.5%
Honda Motor Co., Ltd. 21,400 679,753
Toyota Motor Corp. 24,700 1,290,927
-----------
1,970,680
BUILDING &
RELATED-3.3%
CRH Plc 31,784 1,035,576
Rinker Group Ltd. 34,385 416,434
5
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Vinci, SA 10,547 $1,084,600
-----------
2,536,610
MISCELLANEOUS-0.7%
Largan Precision Co., Ltd. 25,000 534,410
-----------
5,041,700
BASIC INDUSTRY-6.1%
CHEMICALS-1.0%
Bayer AG 3,217 147,838
Hitachi Chemical Co., Ltd. 22,800 598,073
-----------
745,911
MINING & METALS-5.1%
China Shenhua Energy Co.,
Ltd. 493,000 914,744
Cia Vale do Rio Doce (ADR) 45,600 938,448
Rio Tinto Plc 30,379 1,599,640
Xstrata Plc 13,363 508,627
-----------
3,961,459
-----------
4,707,370
UTILITIES-2.4%
ELECTRIC &
GAS UTILITY-0.3%
Gaz de France 7,220 242,082
TELEPHONE UTILITY-2.1%
Nippon Telegraph &
Telephone Corp. 67 327,133
Telefonica, SA 36,141 600,760
Telekom Austria AG 21,267 473,494
TeliaSonera AB 32,912 186,674
-----------
1,588,061
-----------
1,830,143
AEROSPACE &
DEFENSE-1.0%
AEROSPACE-1.0%
BAE Systems Plc 105,547 721,054
European Aeronautic Defence
and Space Co. NV 1,993 57,172
-----------
778,226
MULTI-INDUSTRY
COMPANIES-1.0%
Mitsui & Co., Ltd. 55,000 777,637
TRANSPORTATION-0.2%
RAILROAD-0.2%
Central Japan Railway Co. 16 159,406
Total Common &
Preferred Stocks
(cost $59,571,943) 75,261,430
SHORT-TERM
INVESTMENT-1.3%
TIME DEPOSIT-1.3%
The Bank of New York
4.25%, 7/03/06
(cost $1,000,000) $ 1,000 1,000,000
TOTAL
INVESTMENTS-99.0%
(cost $60,571,943) 76,261,430
Other assets less
liabilities-1.0% 775,569
-----------
NET ASSETS-100% $77,036,999
(a) Non-income producing security.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $173,965 or 0.2% of net assets.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
pfd. - Preferred Stock
See Notes to Financial Statements.
6
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $60,571,943) $76,261,430
Cash 5,775
Foreign cash, at value (cost $379,504) 385,476
Receivable for investment securities sold 483,165
Dividends and interest receivable 212,997
Total assets 77,348,843
LIABILITIES
Payable for capital stock redeemed 109,554
Advisory fee payable 50,055
Custodian fee payable 49,629
Payable for investment securities purchased 33,631
Audit fee payable 19,850
Administrative fee payable 19,607
Distribution fee payable 2,479
Transfer agent fee payable 122
Accrued expenses 26,917
Total liabilities 311,844
NET ASSETS $77,036,999
COMPOSITION OF NET ASSETS
Capital stock, at par $3,951
Additional paid-in capital 60,236,177
Undistributed net investment income 515,605
Accumulated net realized gain on investment and foreign
currency transactions 574,820
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 15,706,446
$77,036,999
Net Asset Value Per Share--1 billion shares of capital stock authorized, $.001
par value
Shares Net Asset
Class Net Assets Outstanding Value
- -------------------------------------------------------------------------------
A $65,496,829 3,354,727 $19.52
B $11,540,170 595,944 $19.36
See Notes to Financial Statements.
7
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $130,626) $1,024,028
Interest 36,763
Total investment income 1,060,791
EXPENSES
Advisory fee 305,294
Distribution fee--Class B 14,428
Transfer agency--Class A 1,206
Transfer agency--Class B 199
Custodian 112,481
Administrative 39,000
Audit 20,248
Printing 19,274
Legal 1,905
Directors' fees 649
Miscellaneous 2,310
Total expenses 516,994
Net investment income 543,797
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 6,806,655
Foreign currency transactions (26,092)
Net change in unrealized appreciation/depreciation of:
Investments (1,265,324)
Foreign currency denominated assets and liabilities 12,899
Net gain on investment and foreign currency transactions 5,528,138
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,071,935
See Notes to Financial Statements.
8
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Six Months Ended Year Ended
June 30, 2006 December 31,
(unaudited) 2005
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $543,797 $428,199
Net realized gain on investment and foreign
currency transactions 6,780,563 8,306,637
Net change in unrealized appreciation/
depreciation of investments and foreign
currency denominated assets and liabilities (1,252,425) 3,589,230
Net increase in net assets from operations 6,071,935 12,324,066
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A (276,971) (294,913)
Class B (27,309) (29,392)
CAPITAL STOCK TRANSACTIONS
Net decrease (4,309,674) (1,826,950)
Total increase 1,457,981 10,172,811
NET ASSETS
Beginning of period 75,579,018 65,406,207
End of period (including undistributed net
investment income of $515,605 and $276,088,
respectively) $77,036,999 $75,579,018
See Notes to Financial Statements.
9
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: Significant Accounting Policies
The AllianceBernstein International Research Growth Portfolio (the
"Portfolio"), formerly AllianceBernstein International Portfolio, is a series
of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's investment objective was to seek to obtain a
total return on its assets from long-term growth of capital principally through
a broad portfolio of marketable securities of established non-U.S. companies
(i.e., companies incorporated outside the U.S.), companies participating in
foreign economies with prospects for growth, and foreign government securities.
The Portfolio is diversified as defined under the Investment Company Act of
1940. The Fund was incorporated in the State of Maryland on November 17, 1987,
as an open-end series investment company. The Fund offers twenty three
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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
markets close well before the Fund 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 Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. Taxes
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. Dividends and Distributions
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
11
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006 amounted to $135,391, none of which was paid to Sanford C.
Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
Purchases Sales
Investment securities (excluding U.S. government
securities) $32,037,531 $36,638,764
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $16,558,046
Gross unrealized depreciation (868,559)
-----------
Net unrealized appreciation $15,689,487
1. Forward Exchange Currency Contracts
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. Option Transactions
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
June 30, 2006 December 31, June 30, 2006 December 31,
(unaudited) 2005 (unaudited) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 272,345 402,864 $5,517,833 $6,471,208
Shares issued in
reinvestment
of dividends 14,547 19,492 276,971 294,913
Shares redeemed (551,843) (624,734) (10,781,293) (10,035,872)
Net decrease (264,951) (202,378) $(4,986,489) $(3,269,751)
CLASS B
Shares sold 147,801 263,445 $2,934,678 $4,216,301
Shares issued in
reinvestment
of dividends 1,446 1,958 27,309 29,392
Shares redeemed (115,445) (169,734) (2,285,172) (2,802,892)
Net increase 33,802 95,669 $676,815 $1,442,801
13
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE F: Risks Involved in Investing in the Portfolio
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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.
NOTE G: Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: Distributions to Shareholders
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
Distributions paid from:
Ordinary income $324,305 $156,549
Total taxable distributions 324,305 156,549
Total distributions paid $324,305 $156,549
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $295,347
Accumulated capital and other losses (6,127,174)(a)
Unrealized appreciation/(depreciation) 16,861,043(b)
-----------
Total accumulated earnings/(deficit) $11,029,216
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$6,107,915 of which $4,623,526 will expire in the year 2010 and $1,484,389 will
expire in the year 2011. To the extent future capital gains are offset by
capital loss carryforwards, such gains will not be distributed. Based on
certain provisions in the Internal Revenue Code, various limitations regarding
the future utilization of these carryforwards, brought forward as a result of
the Portfolio's merger with Brinson Series Trust Global Equity Portfolio, may
apply. During the fiscal year, the Portfolio utilized capital loss
carryforwards of $8,430,131. Net foreign currency losses incurred after October
31, and within the taxable year are deemed to arise on the first business day
of the Portfolio's next taxable year. For the year ended December 31, 2005, the
Portfolio deferred until January 1, 2006, post-October foreign currency losses
of $19,259.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
14
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until December 31,
2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the the-
15
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ory that all fund advisory agreements, distribution agreements and 12b-1 plans
between the Adviser and the AllianceBernstein Funds should be invalidated,
regardless of whether market timing occurred in each individual fund, because
each was approved by fund trustees on the basis of materially misleading
information with respect to the level of market timing permitted in funds
managed by the Adviser. The claims asserted in the other three consolidated
amended complaints are similar to those that the respective plaintiffs asserted
in their previous federal lawsuits. All of these lawsuits seek an unspecified
amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
16
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
17
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
------------------------------------------------------------------------------
Six Months
Ended Year Ended December 31,
June 30, 2006 ---------------------------------------------------------------
(unaudited) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $18.09 $15.26 $13.01 $9.90 $11.69 $16.01
Income From Investment Operations
Net investment income (a) .13 .11 .08(b) .02 -0-(b) .03(b)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions 1.38 2.80 2.20 3.11 (1.78) (3.55)
Contribution from Adviser -0- -0- .01 -0- -0- -0-
Net increase (decrease) in net asset value
from operations 1.51 2.91 2.29 3.13 (1.78) (3.52)
Less: Dividends and Distributions
Dividends from net investment income (.08) (.08) (.04) (.02) (.01) -0-
Distributions from net realized gain on
investment transactions -0- -0- -0- -0- -0- (.78)
Distributions in excess of net realized
gain on investment transactions -0- -0- -0- -0- -0- (.02)
Total dividends and distributions (.08) (.08) (.04) (.02) (.01) (.80)
Net asset value, end of period $19.52 $18.09 $15.26 $13.01 $9.90 $11.69
Total Return
Total investment return based on
net asset value (c) 8.36% 19.16% 17.62% 31.59% (15.28)% (22.35)%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $65,497 $65,496 $58,341 $53,425 $46,478 $64,036
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.22%(d)(e) 1.30% 1.33% 1.80% 1.36% .95%
Expenses, before waivers and
reimbursements 1.22%(d)(e) 1.30% 1.50% 1.80% 1.66% 1.44%
Net investment income 1.38%(d)(e) .67% .63%(b) .22% .04%(b) .23%(b)
Portfolio turnover rate 41% 93% 128% 96% 70% 56%
See footnote summary on page 19.
18
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
------------------------------------------------------------------------------
Six Months October 26,
Ended Year Ended December 31, 2001(f) to
June 30, 2006 -------------------------------------------------- December 31,
(unaudited) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $17.94 $15.15 $12.93 $9.87 $11.68 $11.31
Income From Investment Operations
Net investment income (loss) (a) .11 .06 .05(b) (.02) (.03)(b) (.02)(b)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions 1.36 2.79 2.20 3.09 (1.78) .39
Net increase (decrease) in net asset
value from operations 1.47 2.85 2.25 3.07 (1.81) .37
Less: Dividends
Dividends from net investment income (.05) (.06) (.03) (.01) -0- -0-
Net asset value, end of period $19.36 $17.94 $15.15 $12.93 $9.87 $11.68
Total Return
Total investment return based on
net asset value (c) 8.17% 18.85% 17.41% 31.11% (15.50)% 3.27%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $11,540 $10,083 $7,065 $2,766 $467 $413
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.47%(d)(e) 1.56% 1.56% 2.05% 1.63% 1.20%(e)
Expenses, before waivers and
reimbursements 1.47%(d)(e) 1.56% 1.73% 2.05% 1.92% 2.26%(e)
Net investment income (loss) 1.17%(d)(e) .39% .35%(b) (.17)% (.25)%(b) (.88)%(b)(e)
Portfolio turnover rate 41% 93% 128% 96% 70% 56%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
(f) Commencement of distribution.
19
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein International Research Growth Portfolio (the "Fund")(2),
prepared by Philip L. Kirstein, the Senior Officer, for the independent
directors of the Fund, as required by an August 2004 agreement between the
Adviser and the New York State Attorney General. The Senior Officer's
evaluation of the investment advisory agreement is not meant to diminish the
responsibility or authority of the Board of Directors of the Fund to perform
its duties pursuant to Section 15 of the Investment Company Act of 1940 (the
"40 Act") and applicable state law. The purpose of the summary is to provide
shareholders with a synopsis of the independent evaluation of the
reasonableness of the advisory fees which was provided to the independent
directors in connection with their review of the proposed continuance of the
investment advisory agreement. The Senior Officer's evaluation considered the
following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(3)
Advisory Fee
Based on % of Average
Category Daily Net Assets Fund
- -------------------------------------------------------------------------------
International 75 bp on 1st $2.5 billion International Research
65 bp on next $2.5 billion Growth Portfolio
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
As a % of average
Fund Amount daily net assets
- -------------------------------------------------------------------------------
International Research Growth Portfolio $69,000 0.12%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Prior to February 1, 2006, the Fund was known as AllianceBernstein
International Portfolio.
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
20
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Set forth below are the Fund's latest fiscal year end gross expense ratios.
Fund Gross Expense Ratio Fiscal Year
- -------------------------------------------------------------------------------
International Research Growth Portfolio Class A 1.50% December 31
Class B 1.73%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
Fund Net Assets Effective Alliance
09/30/05 Alliance Institutional Institutional
($MIL) Fee Schedule Advisory Fee
- -------------------------------------------------------------------------------
International Research $71.3 International Large Cap 0.640%
Growth Portfolio Growth Schedule
80 bp on 1st $25m
60 bp on next $25m
50 bp on next $50m
40 bp on the balance
Minimum account size $25m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser manages the Sanford C. Bernstein Fund, Inc., an open-end management
investment company. The Sanford C. Bernstein International Portfolio, whose
investment style is similar to the Fund, has the following advisory fee
schedule in place:
Fund SCB Portfolio Fee Schedule
- -------------------------------------------------------------------------------
International Research SCB International Portfolio 0.925% on first $1 billion
Growth Portfolio 0.85% on next $3 billion
0.80% on next $2 billion
0.75% on next $2 billion
0.65% on the balance
21
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
Fund ACITM Mutual Fund(4) Fee
- -------------------------------------------------------------------------------
International Research International Blend (Sumitomo)(5) 0.30%
Growth Portfolio
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
Fund Fee Schedule
- -------------------------------------------------------------------------------
International Research Client # 1(6) 0.60% on the first $1 billion
Growth Portfolio 0.55% on the next $500 million
0.50% on the next $500 million
0.45% on the next $500 million
0.40% on the balance
Client # 2 0.50% on the first $50 million
0.40% on the balance
Client # 3 0.50%
Client # 4 0.30%
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser. In addition, to the extent that
certain of these sub-advisory relationships are with affiliates of the Adviser,
the fee schedules may not reflect arms-length bargaining or negotiations.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(7)
Effective Lipper
Management Group
Fund Fee Median Rank
- -------------------------------------------------------------------------------
International Research 0.750 0.992 1/10
Growth Portfolio
(4) The name in parenthesis is the distributor of the fund.
(5) The ACITM fund is not a retail fund.
(6) This is the fee schedule of a fund managed by an affiliate of the Adviser.
(7) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
22
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(8) and Lipper Expense Universe(9). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
Lipper Lipper Lipper Lipper
Expense Universe Universe Group Group
Fund Ratio (%)(10) Median (%) Rank Median (%) Rank
- -------------------------------------------------------------------------------------------------------------------------
International Research 1.327 1.108 17/21 1.237 8/10
Growth Portfolio
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
Fund 12b-1 Fee Received
- -------------------------------------------------------------------------------
International Research Growth Portfolio $12,389
(8) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(9) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(10) Most recent fiscal year end Class A share total expense ratio.
23
INTERNATIONAL RESEARCH GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
Adviser
Payments to
Fund ABIRM
- -------------------------------------------------------------------------------
International Research Growth Portfolio $13,316
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(11) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
Although the Fund did not effect any brokerage transaction and pay commissions
to the Adviser's affiliate, Sanford C. Bernstein & Co. LLC, and/or its U.K.
based affiliate, Sanford C. Bernstein Ltd., (collectively "SCB"), during the
Fund's recent fiscal year, the potential for such events exist. The Adviser
represented that SCB's profitability from any business conducted with the Fund
would be comparable to the profitability of SCB's dealings with other similar
third party clients. In the ordinary course of business, SCB receives and pays
liquidity rebates from electronic communications networks ("ECNs") derived from
trading for its clients. These credits and charges are not being passed on to
any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
(11) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
24
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(12) relative to its Lipper Performance Group(13) and
Lipper Performance Universe(14) for the period ended September 30, 2005.
International Research Growth Portfolio Group Universe
- -------------------------------------------------------------------------------
1 year 2/10 4/21
3 year 3/10 6/21
5 year 4/10 6/19
10 year 5/6 6/9
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(15) versus its benchmark(16).
Periods Ending September 30, 2005
Annualized Performance
- --------------------------------------------------------------------------------------------------------------------
Fund 1 Year 3 Year 5 Year 10 Year Since Inception
- -------------------------------------------------------------------------------------------------------------------
International Research Growth Portfolio 29.23 25.25 1.39 5.40 6.80
MSCI EAFE Index (Net) 25.79 24.61 3.16 5.83 8.08
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(12) The performance rankings are for the Class A shares of the Fund.
(13) The Lipper Performance Group is identical to the Lipper Expense Group.
(14) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(15) The performance returns are for the Class A shares of the Fund.
(16) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
25
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN LARGE CAP GROWTH PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
LARGE CAP GROWTH PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
LARGE CAP GROWTH PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- --------------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $ 922.94 $3.96 0.83%
Hypothetical (5% return before expenses) $1,000 $1,020.68 $4.16 0.83%
CLASS B
Actual $1,000 $ 921.66 $5.15 1.08%
Hypothetical (5% return before expenses) $1,000 $1,019.44 $5.41 1.08%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
LARGE CAP GROWTH PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Google, Inc. Cl. A $ 48,969,357 5.1%
WellPoint, Inc. 48,770,454 5.0
Halliburton Co. 43,795,032 4.5
Apple Computer, Inc. 43,188,432 4.5
The Procter & Gamble Co. 38,347,320 4.0
The Boeing Co. 37,834,229 3.9
Genentech, Inc. 37,137,200 3.8
Yahoo!, Inc. 31,478,700 3.2
QUALCOMM, Inc. 30,966,096 3.2
Corning, Inc. 28,469,211 2.9
------------ -----
$388,956,031 40.1%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Technology $267,754,879 27.6%
Health Care 225,082,410 23.2
Finance 162,593,407 16.8
Consumer Services 93,865,423 9.7
Energy 92,843,128 9.6
Consumer Staples 51,218,428 5.3
Aerospace & Defense 45,041,459 4.6
Capital Goods 11,378,629 1.2
Multi-Industry Companies 6,148,406 0.6
Transportation 5,170,296 0.5
------------ -----
Total Investments* 961,096,465 99.1
Cash and receivables, net of liabilities 8,545,244 0.9
------------ -----
Net Assets $969,641,709 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
LARGE CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS-99.1%
TECHNOLOGY-27.6%
COMMUNICATION EQUIPMENT-7.3%
Corning, Inc. (a) 1,176,900 $ 28,469,211
Juniper Networks, Inc. (a) 736,900 11,783,031
QUALCOMM, Inc. 772,800 30,966,096
------------
71,218,338
COMPUTER HARDWARE/STORAGE-4.5%
Apple Computer, Inc. (a) 756,100 43,188,432
COMPUTER PERIPHERALS-1.8%
Network Appliance, Inc. (a) 508,900 17,964,170
INTERNET MEDIA-8.3%
Google, Inc. Cl. A (a) 116,780 48,969,357
Yahoo!, Inc. (a) 953,900 31,478,700
------------
80,448,057
SEMICONDUCTOR COMPONENTS-5.7%
Advanced Micro Devices, Inc. (a) 970,800 23,706,936
Broadcom Corp. Cl. A (a) 925,450 27,809,772
NVIDIA Corp. (a) 160,600 3,419,174
------------
54,935,882
------------
267,754,879
HEALTH CARE-23.2%
BIOTECHNOLOGY-7.9%
Amgen, Inc. (a) 51,600 3,365,868
Genentech, Inc. (a) 454,000 37,137,200
Gilead Sciences, Inc. (a) 331,350 19,602,666
Monsanto Co. 193,300 16,273,927
------------
76,379,661
DRUGS-2.7%
Teva Pharmaceutical Industries Ltd. (ADR) 828,400 26,169,156
MEDICAL PRODUCTS-2.8%
Alcon, Inc. 275,200 27,120,960
MEDICAL SERVICES-9.8%
Caremark Rx, Inc. 472,700 23,573,549
Medco Health Solutions, Inc. (a) 113,400 6,495,552
UnitedHealth Group, Inc. 370,100 16,573,078
WellPoint, Inc. (a) 670,200 48,770,454
------------
95,412,633
------------
225,082,410
FINANCE-16.8%
BANKING-MONEY CENTER-4.2%
JPMorgan Chase & Co. 492,400 20,680,800
UBS AG 184,600 20,250,620
------------
40,931,420
BANKING-REGIONAL-0.8%
Northern Trust Corp. 132,700 7,338,310
BROKERAGE & MONEY MANAGEMENT-8.3%
Franklin Resources, Inc. 241,000 20,921,210
Legg Mason, Inc. 264,690 26,341,948
Merrill Lynch & Co., Inc. 230,500 16,033,580
The Goldman Sachs Group, Inc. 116,950 17,592,789
------------
80,889,527
INSURANCE-2.2%
American International Group, Inc. 355,692 21,003,613
MISCELLANEOUS-1.3%
NASDAQ Stock Market, Inc. (a) 202,510 6,055,049
NYSE Group, Inc. (a) 93,100 6,375,488
------------
12,430,537
------------
162,593,407
CONSUMER SERVICES-9.7%
CELLULAR COMMUNICATIONS-1.1%
America Movil, SA de CV (ADR) 335,300 11,152,078
RESTAURANTS & LODGING-3.6%
Hilton Hotels Corp. 243,000 6,872,040
Las Vegas Sands Corp. (a) 111,800 8,704,748
McDonald's Corp. 400,700 13,463,520
Starwood Hotels & Resorts Worldwide, Inc. 89,800 5,418,532
------------
34,458,840
RETAIL-GENERAL MERCHANDISE-5.0%
eBay, Inc. (a) 435,600 12,758,724
Lowe's Cos., Inc. 306,600 18,601,422
Target Corp. 345,700 16,894,359
------------
48,254,505
------------
93,865,423
3
LARGE CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
ENERGY-9.6%
OIL SERVICE-9.6%
Baker Hughes, Inc. 102,000 $ 8,348,700
GlobalSantaFe Corp. 213,100 12,306,525
Halliburton Co. 590,150 43,795,032
Nabors Industries Ltd. (a) 612,900 20,709,891
Schlumberger Ltd. 118,000 7,682,980
------------
92,843,128
CONSUMER STAPLES-5.3%
HOUSEHOLD PRODUCTS-4.0%
The Procter & Gamble Co. 689,700 38,347,320
RETAIL-FOOD & DRUG-1.3%
Walgreen Co. 153,700 6,891,908
Whole Foods Market, Inc. 92,500 5,979,200
------------
12,871,108
------------
51,218,428
AEROSPACE & DEFENSE-4.6%
AEROSPACE-4.6%
The Boeing Co. 461,900 37,834,229
Rockwell Collins, Inc. 129,000 7,207,230
------------
45,041,459
CAPITAL GOODS-1.2%
ELECTRICAL EQUIPMENT-0.7%
Emerson Electric Co. 80,300 6,729,943
MISCELLANEOUS-0.5%
United Technologies Corp. 73,300 4,648,686
------------
11,378,629
MULTI-INDUSTRY COMPANIES-0.6%
Textron, Inc. 66,700 6,148,406
TRANSPORTATION-0.5%
RAILROAD-0.5%
CSX Corp. 73,400 5,170,296
Total Common Stocks
(cost $841,772,117) 961,096,465
SHORT-TERM INVESTMENT-0.1%
TIME DEPOSIT-0.1%
The Bank of New York
4.25%, 7/03/06
(cost $654,000) $ 654 654,000
TOTAL INVESTMENTS-99.2%
(cost $842,426,117) 961,750,465
Other assets less liabilities-0.8% 7,891,244
NET ASSETS-100% $969,641,709
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See Notes to Financial Statements.
4
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $842,426,117) $ 961,750,465
Cash 357,451
Receivable for investment securities sold 12,136,282
Receivable for capital stock sold 1,196,147
Dividends and interest receivable 414,168
Total assets 975,854,513
LIABILITIES
Payable for capital stock redeemed 2,847,857
Payable for investment securities purchased 2,353,559
Advisory fee payable 638,419
Distribution fee payable 100,990
Administrative fee payable 19,607
Transfer agent fee payable 95
Accrued expenses 252,277
Total liabilities 6,212,804
NET ASSETS $ 969,641,709
COMPOSITION OF NET ASSETS
Capital stock, at par $ 39,262
Additional paid-in capital 1,432,638,275
Net investment loss (1,740,319)
Accumulated net realized loss on investment transactions (580,619,857)
Net unrealized appreciation of investments 119,324,348
$ 969,641,709
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $507,390,094 20,370,551 $24.91
B $462,251,615 18,891,305 $24.47
See Notes to Financial Statements.
5
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $147,094) $ 3,825,469
Interest 77,864
Total investment income 3,903,333
EXPENSES
Advisory fee 4,349,328
Distribution fee--Class B 720,986
Transfer agency--Class A 2,848
Transfer agency--Class B 2,771
Printing 319,617
Custodian 115,871
Administrative 39,000
Legal 32,357
Audit 20,247
Directors' fees 2,279
Miscellaneous 38,348
Total expenses 5,643,652
Net investment loss (1,740,319)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investment transactions 131,234,699(a)
Net change in unrealized appreciation/depreciation of
Investments (212,727,076)
Net loss on investment transactions (81,492,377)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (83,232,696)
(a) On May 1, 2006, the Portfolio had a redemption-in-kind with total proceeds
in the amount of $95,697,241. The gain on investments of $18,767,732 will not
be realized for tax purposes.
See Notes to Financial Statements.
6
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment loss $ (1,740,319) $ (4,678,989)
Net realized gain on investment
transactions 131,234,699 104,348,252
Net change in unrealized
appreciation/depreciation of
investments (212,727,076) 60,172,521
Net increase (decrease) in net assets
from operations (83,232,696) 159,841,784
CAPITAL STOCK TRANSACTIONS
Net decrease (190,558,112) (176,003,150)
Total decrease (273,790,808) (16,161,366)
NET ASSETS
Beginning of period 1,243,432,517 1,259,593,883
End of period (including net
investment loss of ($1,740,319)
and $0, respectively) $ 969,641,709 $1,243,432,517
See Notes to Financial Statements.
7
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Large Cap Growth Portfolio (the "Portfolio") is a series
of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's investment objective was to seek growth of
capital by pursuing aggressive investment policies. The Portfolio is
diversified as defined under the Investment Company Act of 1940. The Fund was
incorporated in the State of Maryland on November 17, 1987, as an open-end
series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many
8
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
of its foreign equity securities using fair value prices based on third party
vendor modeling tools to the extent available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date or as soon as the Porfolio
is informed of the dividend. Interest income is accrued daily. Investment
transactions are accounted for on the date securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Portfolio amortizes premiums and accretes discounts as adjustments to interest
income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
9
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $731,337, of which $12,172 and $0, respectively, was
paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities (excluding U.S.
government securities) $ 484,804,570 $ 662,741,611
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $ 142,241,763
Gross unrealized depreciation (22,917,415)
Net unrealized appreciation $ 119,324,348
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 374,252 1,512,339 $ 10,167,082 $ 38,903,047
Shares redeemed (2,937,845) (6,589,775) (78,271,077) (156,255,897)
Net decrease (2,563,593) (5,077,436) $ (68,103,995) $(117,352,850)
CLASS B
Shares sold 1,265,111 2,569,510 $ 33,642,740 $ 61,795,376
Shares redeemed (5,896,662) (5,144,396) (156,096,857) (120,445,676)
Net decrease (4,631,551) (2,574,886) $(122,454,117) $ (58,650,300)
11
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT)
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $ (705,400,004)(a)
Unrealized appreciation/(depreciation) 325,596,872(b)
Total accumulated earnings/(deficit) $ (379,803,132)
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$705,400,004 of which $60,068,417 will expire in the year 2009, $478,225,244
will expire in the year 2010 and $167,106,343 will expire in the year 2011. To
the extent future capital gains are offset by capital loss carryforwards, such
gains will not be distributed. During the current fiscal year, the Portfolio
utilized capital loss carryforwards of $102,165,650.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in
13
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
the Adviser's sponsored mutual funds. The Adviser responded to the Information
Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
14
LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ --------- ------------
Net asset value,
beginning of period $26.99 $23.44 $21.58 $17.45 $25.16 $32.05
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss (a) (.02) (.07) (.03)(b) (.05)(b) (.08) (.06)
Net realized and unrealized
gain (loss) on investment
transactions (2.06) 3.62 1.89 4.18 (7.63) (5.31)
Net increase (decrease) in
net asset value from
operations (2.08) 3.55 1.86 4.13 (7.71) (5.37)
LESS: DISTRIBUTIONS
Distributions from net
realized gain on investment
transactions -0- -0- -0- -0- -0- (1.38)
Distributions in excess of
net realized gain on
investment transactions -0- -0- -0- -0- -0- (.14)
Total distributions -0- -0- -0- -0- -0- (1.52)
Net asset value, end of period $24.91 $26.99 $23.44 $21.58 $17.45 $25.16
TOTAL RETURN
Total investment return based
on net asset value (c) (7.71)% 15.15% 8.62% 23.67% (30.64)% (17.21)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $507,390 $618,980 $656,544 $917,935 $869,130 $1,586,575
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .83%(d)(e) .81% .81% 1.04% 1.05% 1.04%
Expenses, before waivers and
reimbursements .83%(d)(e) .81% .98% 1.05% 1.05% 1.04%
Net investment loss (.16)%(d)(e) (.28)% (.13)%(b) (.24)%(b) (.41)% (.21)%
Portfolio turnover rate 42% 54% 73% 79% 109% 49%
See footnote summary on page 16.
15
LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ --------- ------------
Net asset value,
beginning of period $26.55 $23.11 $21.33 $17.29 $25.00 $31.93
INCOME FROM INVESTMENT
OPERATIONS
Net investment loss (a) (.06) (.12) (.08)(b) (.09)(b) (.13) (.12)
Net realized and unrealized
gain (loss) on investment
transactions (2.02) 3.56 1.86 4.13 (7.58) (5.29)
Net increase (decrease) in
net asset value from
operations (2.08) 3.44 1.78 4.04 (7.71) (5.41)
LESS: DISTRIBUTIONS
Distributions from net
realized gain on investment
transactions -0- -0- -0- -0- -0- (1.38)
Distributions in excess of
net realized gain on
investment transactions -0- -0- -0- -0- -0- (.14)
Total distributions -0- -0- -0- -0- -0- (1.52)
Net asset value, end of period $24.47 $26.55 $23.11 $21.33 $17.29 $25.00
TOTAL RETURN
Total investment return based
on net asset value (c) (7.83)% 14.89% 8.34% 23.37% (30.84)% (17.40)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $462,252 $624,453 $603,050 $693,764 $493,937 $572,266
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.08%(d)(e) 1.06% 1.06% 1.29% 1.31% 1.29%
Expenses, before waivers and
reimbursements 1.08%(d)(e) 1.06% 1.24% 1.30% 1.31% 1.29%
Net investment loss (.41)%(d)(e) (.53)% (.38)%(b) (.49)%(b) (.64)% (.47)%
Portfolio turnover rate 42% 54% 73% 79% 109% 49%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
16
LARGE CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Large Cap Growth Portfolio (the "Fund"), prepared by Philip
L. Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Growth 75 bp on 1st $2.5 billion Large Cap Growth Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Large Cap Growth Portfolio $69,000 0.01%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
17
LARGE CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Large Cap Growth Portfolio Class A 0.98% December 31
Class B 1.24%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
EFFECTIVE
NET ASSETS ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Large Cap Growth $1,164.6 Large Cap Growth Schedule 0.278%
Portfolio 80 bp on 1st $25m
50 bp on next $25m
40 bp on next $50m
30 bp on next $100m
25 bp on the balance
Minimum account size $10 m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Equity Growth 0.80%
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
FUND ACITM MUTUAL FUND(4) FEE
- -------------------------------------------------------------------------------
Large Cap Growth Alliance American Premier Growth 0.95%
Portfolio (Sakura/Mitsui/Fuji Bank/Nikko)
Alliance American Premier Growth 0.70%
Institutional (Nomura)
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
Large Cap Growth Portfolio Client #1 0.40%
Client #2 0.60% on first $500 million
0.50% thereafter
Client #3(5) 0.60% on first $1 billion
0.55% on the next $500 million
0.50% on the next $500 million
0.45% on the next $500 million
0.40% thereafter
Client #4 0.35% on first $50 million
0.30% on next $100 million
0.25% thereafter
Client #5 0.40% on first $300 million
0.37% on next $300 million
0.35% on next $300 million
0.32% on next $600 million
0.25% thereafter
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser. In addition, to the extent that
certain of these sub-advisory relationships are with affiliates of the Adviser,
the fee schedules may not reflect arms-length bargaining or negotiations.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers.
(4) The name in parenthesis is the distributor of the fund.
(5) This is the fee schedule of a fund managed by an affiliate of the Adviser.
19
LARGE CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Lipper's analysis included the Fund's ranking with respect to the proposed
management fee relative to the Lipper group median at the approximate current
asset level of the Fund.(6)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Large Cap Growth Portfolio 0.750 0.640 9/13
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(7) and Lipper Expense Universe(8). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO(%)(9) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Large Cap Growth
Portfolio 0.803 0.850 23/65 0.690 8/13
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
(6) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(7) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(8) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(9) Most recent fiscal year end Class A share total expense ratio.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Large Cap Growth Portfolio $1,554,412
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Large Cap Growth Portfolio $806,265
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(10) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
(10) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
21
LARGE CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(11) relative to its Lipper Performance Group(12) and
Lipper Performance Universe(13) for the period ended September 30, 2005.
LARGE CAP GROWTH PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 5/13 11/65
3 year 10/13 37/64
5 year 6/11 27/52
10 year 3/11 6/23
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(14) versus its benchmark(15).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
LARGE CAP GROWTH PORTFOLIO 18.88 14.14 -6.47 8.48 11.06
Russell 1000 Growth Index 11.60 14.74 -8.64 6.89 8.68
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(11) The performance rankings are for the Class A shares of the Fund.
(12) The Lipper Performance Group is identical to the Lipper Expense Group.
(13) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(14) The performance returns are for the Class A shares of the Fund.
(15) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
22
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- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN SMALL CAP GROWTH PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
SMALL CAP GROWTH PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
SMALL CAP GROWTH ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $ 1,000 $ 1,048.94 $ 5.84 1.15%
Hypothetical (5%
return before
expenses) $ 1,000 $ 1,019.09 $ 5.76 1.15%
CLASS B
Actual $ 1,000 $ 1,047.97 $ 7.11 1.40%
Hypothetical (5%
return before
expenses) $ 1,000 $ 1,017.85 $ 7.00 1.40%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
SMALL CAP GROWTH PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Euronet Worldwide, Inc. $ 1,369,810 1.8%
Integrated Device Technologies, Inc. 1,348,518 1.8
Strayer Education, Inc. 1,330,544 1.8
Psychiatric Solutions, Inc. 1,315,494 1.8
Bright Horizons Family Solutions, Inc. 1,258,846 1.7
WellCare Health Plans, Inc. 1,239,444 1.7
Huron Consulting Group, Inc. 1,201,727 1.6
Orient-Express Hotels Ltd. Cl. A 1,196,272 1.6
Chemed Corp. 1,194,207 1.6
Life Time Fitness, Inc. 1,189,139 1.6
----------- ------
$12,644,001 17.0%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
_______________________________________________________________________________
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Consumer Services $19,484,197 26.2%
Technology 16,917,573 22.8
Health Care 10,910,252 14.7
Energy 7,959,548 10.7
Finance 5,667,355 7.6
Capital Goods 5,017,282 6.8
Basic Industry 2,862,527 3.9
Transportation 1,907,674 2.6
Multi-Industry Companies 1,194,207 1.6
Consumer Staples 610,511 0.8
Total Investments* 72,531,126 97.7
Cash and receivables, net of liabilities 1,758,116 2.3
Net Assets $74,289,242 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.7%
CONSUMER SERVICES-26.2%
ADVERTISING-1.5%
Digitas, Inc. (a) 94,300 $ 1,095,766
APPAREL-1.9%
Carter's, Inc. (a) 37,000 977,910
Under Armour, Inc. Cl. A (a) 11,100 473,082
------------
1,450,992
BROADCASTING & CABLE-1.3%
Entravision Communications Corp. Cl. A (a) 109,000 934,130
ENTERTAINMENT/ LEISURE-1.3%
Audible, Inc. (a) 46,200 419,958
THQ, Inc. (a) 25,650 554,040
------------
973,998
PRINTING & PUBLISHING-1.5%
VistaPrint Ltd. (a) 40,900 1,093,666
RESTAURANT & LODGING-1.6%
Orient-Express Hotels Ltd. Cl. A 30,800 1,196,272
RETAIL-GENERAL MERCHANDISE-2.8%
Coldwater Creek, Inc. (a) 31,950 854,982
MarineMax, Inc. (a) 27,300 716,079
Select Comfort Corp. (a) 24,000 551,280
------------
2,122,341
MISCELLANEOUS-14.3%
Administaff, Inc. 25,500 913,155
American Reprographics Co. (a) 29,200 1,058,500
Bright Horizons Family Solutions, Inc. (a) 33,400 1,258,846
Huron Consulting Group, Inc. (a) 34,247 1,201,727
Laureate Education, Inc. (a) 10,420 444,205
Life Time Fitness, Inc. (a) 25,700 1,189,139
LoopNet Inc. (a) 15,500 288,455
MSC Industrial Direct Co., Inc. Cl. A 20,700 984,699
Nutri/System, Inc.(a) 15,000 931,950
Resources Connection, Inc. (a) 40,600 1,015,812
Strayer Education, Inc. 13,700 1,330,544
------------
10,617,032
------------
19,484,197
TECHNOLOGY-22.8%
COMMUNICATION EQUIPMENT-4.4%
Atheros Communications, Inc. (a) 19,100 362,136
Exar Corp. (a) 40,700 540,089
Oplink Communications, Inc. (a) 42,600 780,006
Redback Networks, Inc. (a) 27,400 502,516
Witness Systems, Inc. (a) 52,000 1,048,840
------------
3,233,587
COMMUNICATION SERVICES-0.9%
NTELOS Holdings Corp. (a) 43,100 622,795
COMPUTER SERVICES-2.5%
Euronet Worldwide, Inc. (a) 35,700 1,369,810
Global Cash Access, Inc. (a) 32,400 506,412
------------
1,876,222
SEMICONDUCTOR COMPONENTS-6.9%
Entegris, Inc. (a) 68,800 655,664
Integrated Device Technologies, Inc. (a) 95,100 1,348,518
Micrel, Inc. (a) 90,600 906,906
Microsemi Corp. (a) 30,300 738,714
ON Semiconductor Corp. (a) 120,600 709,128
Semtech Corp. (a) 33,900 489,855
Vimicro International Corp. (ADR) (a) 22,600 284,986
------------
5,133,771
SOFTWARE-5.0%
DealerTrack Holdings, Inc. (a) 35,400 782,694
FileNET Corp. (a) 40,000 1,077,200
Informatica Corp. (a) 83,000 1,092,280
Quest Software, Inc. (a) 55,000 772,200
------------
3,724,374
MISCELLANEOUS-3.1%
Electronics for Imaging, Inc. (a) 53,900 1,125,432
Micros Systems, Inc. (a) 3,500 152,880
VeriFone Holdings, Inc. (a) 34,400 1,048,512
------------
2,326,824
------------
16,917,573
HEALTH CARE-14.7%
BIOTECHNOLOGY-4.7%
BioMarin Pharmaceuticals, Inc. (a) 15,900 228,483
Coley Pharmaceutical Group, Inc. (a) 7,000 80,850
Cubist Pharmaceuticals, Inc. (a) 25,000 629,500
Meridian Bioscience, Inc. 27,500 686,125
Nektar Therapeutics (a) 15,700 287,938
3
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Neopharm, Inc. (a) 20,900 $ 111,397
PDL BioPharma, Inc. (a) 19,500 358,995
Renovis, Inc. (a) 10,800 165,348
Senomyx, Inc. (a) 44,900 647,907
Telik, Inc. (a) 8,000 132,000
Zymogenetics, Inc. (a) 9,300 176,421
------------
3,504,964
MEDICAL PRODUCTS-4.0%
Abaxis, Inc. (a) 44,400 993,228
ArthroCare Corp. (a) 21,500 903,215
DexCom Inc. (a) 28,000 380,240
OraSure Technologies, Inc. (a) 13,600 129,472
Ventana Medical Systems, Inc. (a) 12,300 580,314
------------
2,986,469
MEDICAL SERVICES-6.0%
Psychiatric Solutions, Inc. (a) 45,900 1,315,494
Stericycle, Inc. (a) 15,290 995,379
United Surgical Partners
International, Inc. (a) 23,600 709,652
Visicu, Inc. (a) 9,000 158,850
WellCare Health Plans, Inc. (a) 25,269 1,239,444
------------
4,418,819
------------
10,910,252
ENERGY-10.7%
OIL SERVICE-8.3%
CARBO Ceramics, Inc. 13,000 638,690
Core Laboratories NV (a) 16,384 1,000,079
Dril-Quip, Inc. (a) 11,200 923,328
FMC Technologies, Inc. (a) 11,500 775,790
Helmerich & Payne, Inc. 6,100 367,586
Hydril (a) 10,200 800,904
Superior Well Services, Inc. (a) 13,800 343,620
Tesco Corp. (a) 21,900 453,768
W-H Energy Services, Inc. (a) 16,900 859,027
------------
6,162,792
MISCELLANEOUS-2.4%
Bill Barrett Corp. (a) 23,600 698,796
EXCO Resources, Inc. (a) 34,300 391,020
Range Resources Corp. 26,000 706,940
------------
1,796,756
------------
7,959,548
FINANCE-7.6%
BANKING - REGIONAL-1.2%
Capitol Bancorp Ltd. 3,700 144,115
Community Bancorp (a) 13,000 404,040
First Republic Bank-
San Francisco CA 7,200 329,760
------------
877,915
BROKERAGE & MONEY MANAGEMENT-3.3%
Affiliated Managers Group, Inc.(a) 8,700 755,943
Greenhill & Co., Inc. 15,200 923,552
optionsXpress Holdings, Inc. 33,700 785,547
------------
2,465,042
INSURANCE-0.7%
Primus Guaranty Ltd. (a) 44,630 495,393
MISCELLANEOUS-2.4%
Clayton Holdings, Inc. (a) 26,020 339,561
GFI Group, Inc. (a) 12,000 647,400
Morningstar, Inc. (a) 20,300 842,044
------------
1,829,005
------------
5,667,355
CAPITAL GOODS-6.8%
ELECTRICAL EQUIPMENT-1.2%
Essex Corp. (a) 46,700 860,214
MACHINERY-3.4%
Actuant Corp. Cl. A 6,700 334,665
Astec Industries, Inc. (a) 27,300 931,476
Bucyrus International, Inc. Cl. A 15,500 782,750
Oshkosh Truck Corp. 9,600 456,192
------------
2,505,083
POLLUTION CONTROL-0.1%
Basin Water, Inc. (a) 5,300 53,106
MISCELLANEOUS-2.1%
IDEX Corp. 18,370 867,064
Simpson Manufacturing Co., Inc. 20,300 731,815
------------
1,598,879
------------
5,017,282
BASIC INDUSTRY-3.9%
CHEMICALS-1.4%
Hexcel Corp. (a) 65,800 1,033,718
MISCELLANEOUS-2.5%
Knoll, Inc. 57,900 1,063,044
US Concrete, Inc. (a) 69,300 765,765
------------
1,828,809
------------
2,862,527
TRANSPORTATION-2.6%
AIR FREIGHT-1.0%
UTI Worldwide, Inc. 28,800 726,624
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
SHIPPING-1.6%
Kirby Corp. (a) 29,900 $ 1,181,050
------------
1,907,674
MULTI-INDUSTRY COMPANIES-1.6%
Chemed Corp. 21,900 1,194,207
CONSUMER STAPLES-0.8%
FOOD-0.8%
Hain Celestial Group, Inc. (a) 23,700 610,511
Total Common Stocks
(cost $60,779,566) 72,531,126
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-1.9%
TIME DEPOSIT-1.9%
The Bank of New York
4.25%, 7/03/06
(cost $1,427,000) $ 1,427 $ 1,427,000
TOTAL INVESTMENTS-99.6%
(cost $62,206,566) 73,958,126
Other assets less liabilities-0.4% 331,116
NET ASSETS-100% $74,289,242
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See Notes to Financial Statements.
5
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $62,206,566) $ 73,958,126
Cash 1,022
Receivable for investment securities sold 798,995
Receivable for capital stock sold 194,708
Interest receivable 505
Total assets 74,953,356
LIABILITIES
Payable for investment securities purchased 469,675
Advisory fee payable 46,346
Administrative fee payable 19,607
Distribution fee payable 4,938
Payable for capital stock redeemed 2,631
Transfer agent fee payable 123
Accrued expenses 120,794
Total liabilities 664,114
NET ASSETS $ 74,289,242
COMPOSITION OF NET ASSETS
Capital stock, at par $ 5,802
Additional paid-in capital 117,408,424
Net investment loss (396,101)
Accumulated net realized loss on investment transactions (54,480,443)
Net unrealized appreciation of investments 11,751,560
-------------
$ 74,289,242
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $51,337,496 3,991,200 $12.86
B $22,951,746 1,811,080 $12.67
See Notes to Financial Statements.
6
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends $ 60,826
Interest 28,909
Total investment income 89,735
EXPENSES
Advisory fee 292,130
Distribution fee--Class B 31,270
Transfer agency--Class A 954
Transfer agency--Class B 455
Custodian 77,359
Administrative 39,000
Audit 20,248
Printing 19,233
Legal 1,992
Directors' fees 639
Miscellaneous 2,556
Total expenses 485,836
Net investment loss (396,101)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 7,215,085
Net change in unrealized appreciation/depreciation of
investments (3,165,405)
Net gain on investment transactions 4,049,680
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,653,579
See Notes to Financial Statements.
7
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
---------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (396,101) $ (745,468)
Net realized gain on investment
transactions 7,215,085 8,362,243
Net change in unrealized
appreciation/depreciation of
investments (3,165,405) (4,759,908)
Net increase in net assets from
operations 3,653,579 2,856,867
CAPITAL STOCK TRANSACTIONS
Net decrease (1,284,028) (17,046,301)
Total increase (decrease) 2,369,551 (14,189,434)
NET ASSETS
Beginning of period 71,919,691 86,109,125
End of period (including net investment
loss of ($396,101) and $0,
respectively) $ 74,289,242 $ 71,919,691
See Notes to Financial Statements.
8
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Small Cap Growth Portfolio (the "Portfolio") is a series
of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's investment objective was to seek growth of
capital by pursuing aggressive investment policies. Current income is
incidental to the Portfolio's objective. The Portfolio is diversified as
defined under the Investment Company Act of 1940. The Fund was incorporated in
the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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
9
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
interim and may materially affect the value of those securities. To account for
this, the Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked 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 and loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holdings 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 investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's
avarage daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006 amounted to $75,532, none of which was paid to Sanford C.
Bernstein &Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
------------- -------------
Investment securities (excluding U.S.
government securities) $30,976,600 $34,007,219
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $14,305,742
Gross unrealized depreciation (2,554,182)
Net unrealized appreciation $11,751,560
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
11
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 658,967 403,901 $ 8,679,622 $ 4,558,183
Shares redeemed (703,050) (1,659,295) (9,420,584) (18,857,380)
Net decrease (44,083) (1,255,394) $ (740,962) $(14,299,197)
CLASS B
Shares sold 370,533 649,285 $ 5,024,871 $ 7,335,767
Shares redeemed (417,746) (911,889) (5,567,937) (10,082,871)
Net decrease (47,213) (262,604) $ (543,066) $ (2,747,104)
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
12
ALLIANCEBERNSTEIN 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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT)
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. As of December
31, 2005, the components of accumulated earnings/(deficit) on a tax basis were
as follows:
Accumulated capital and other losses $(60,257,446)(a)
Unrealized appreciation/(depreciation) 13,478,883(b)
Total accumulated earnings/(deficit) $(46,778,563)
(a) On December 31, 2005, the Portfolio had a net capital loss carrryforward
of $60,257,446 of which $14,934,208 expires in the year 2009, and $45,323,238
expires in the year 2010. To the extent future capital gains are offset by
capital loss carryforwards, such gains will not be distributed. Based on
certain provisions in the Internal Revenue Code, various limitations regarding
the future utilization of these carryforwards, brought forward as a result of
the Portfolio's merger with Brinson Series Trust Small Cap Growth Portfolio,
may apply. During the current fiscal year, the Portfolio utilized capital loss
carryforwards of $8,549,451.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to
13
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
15
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
-------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net assets value, beginning of period $12.26 $11.65 $10.17 $ 6.83 $10.01 $11.84
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.06) (.11) (.10)(b) (.09) (.07)(b) (.07)(b)
Net realized and unrealized gain (loss)
on investment transactions .66 .72 1.58 3.43 (3.11) (1.41)
Net increase (decrease) in net asset value
from operations .60 .61 1.48 3.34 (3.18) (1.48)
LESS: DISTRIBUTIONS
Distributions from net realized gain
on investment transactions -0- -0- -0- -0- -0- (.26)
Distributions in excess of net realized
gain on investment transactions -0- -0- -0- -0- -0- (.09)
Total distributions -0- -0- -0- -0- -0- (.35)
Net asset value, end of period $12.86 $12.26 $11.65 $10.17 $ 6.83 $10.01
TOTAL RETURN
Total investment return based on
net asset value (c) 4.89% 5.24% 14.55% 48.90% (31.77)% (12.75)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $51,337 $49,453 $61,661 $61,079 $86,093 $184,223
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.15%(d)(e) 1.18% 1.14% 1.36% 1.11% .95%
Expenses, before waivers and
reimbursements 1.15%(d)(e) 1.18% 1.30% 1.36% 1.25% 1.16%
Net investment loss (.92)%(d)(e) (.93)% (.93)%(b) (1.10)% (.86)%(b) (.70)%(b)
Portfolio turnover rate 41% 90% 92% 129% 111% 113%
See footnote summary on page 17.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ---------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $12.09 $11.53 $10.08 $ 6.78 $ 9.98 $11.82
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.08) (.13) (.12)(b) (.11) (.09)(b) (.09)(b)
Net realized and unrealized gain (loss)
on investment transactions .66 .69 1.57 3.41 (3.11) (1.40)
Net increase (decrease) in net asset value
from operations .58 .56 1.45 3.30 (3.20) (1.49)
LESS: DISTRIBUTIONS
Distributions from net realized gain
on investment transactions -0- -0- -0- -0- -0- (.26)
Distributions in excess of net realized
gain on investment transactions -0- -0- -0- -0- -0- (.09)
Total distributions -0- -0- -0- -0- -0- (.35)
Net asset value, end of period $12.67 $12.09 $11.53 $10.08 $ 6.78 $ 9.98
TOTAL RETURN
Total investment return based
on net asset value (c) 4.80% 4.86% 14.39% 48.67% (32.06)% (12.86)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $22,952 $22,467 $24,448 $15,846 $5,101 $6,835
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.40%(d)(e) 1.43% 1.40% 1.61% 1.37% 1.20%
Expenses, before waivers and
reimbursements 1.40%(d)(e) 1.43% 1.56% 1.61% 1.51% 1.43%
Net investment loss (1.17)%(d)(e) (1.18)% (1.19)%(b) (1.37)% (1.10)%(b) (.98)%(b)
Portfolio turnover rate 41% 90% 92% 129% 111% 113%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
17
SMALL CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Small Cap Growth Portfolio (the "Fund"), prepared by Philip
L. Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Growth 75 bp on 1st $2.5 billion Small Cap Growth Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Small Cap Growth Portfolio $69,000 0.09%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Small Cap Growth Portfolio Class A 1.30% December 31
Class B 1.56%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- --------------------------------------------------------------------------------------------
Small Cap Growth Portfolio $71.8 Small Cap Growth 0.954%
Schedule
100 bp on 1st $50m
85 bp on next $50m
75 bp on the balance
MINIMUM ACCOUNT SIZE $10 M
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fee for the following sub-advisory relationship:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
Small Cap Growth Portfolio Client # 1 0.65% on first $25 million
0.60% on next $75 million
0.55% thereafter
19
SMALL CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(3)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Small Cap Growth Portfolio 0.750 0.800 2/14
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(4) and Lipper Expense Universe(5). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(6) MEDIAN (%) RANK MEDIAN (%) RANK
- ------------------------------------------------------------------------------------------------------
Small Cap Growth Portfolio 1.137 1.002 30/38 1.048 12/14
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
(3) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(4) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(5) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(6) Most recent fiscal year end Class A share total expense ratio.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Small Cap Growth Portfolio $46,884
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Small Cap Growth Portfolio $145,511
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(7) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
(7) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
21
SMALL CAP GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3 and 5 year performance
rankings of the Fund(8) relative to its Lipper Performance Group(9) and Lipper
Performance Universe(10) for the period ended September 30, 2005.
SMALL CAP GROWTH PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 9/14 30/38
3 year 7/14 12/38
5 year 6/13 15/34
Set forth below are the 1, 3, 5 year and since inception performance returns of
the Fund (in bold)(11) versus its benchmark(12).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- ----------------------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION
- ----------------------------------------------------------------------------------------------
SMALL CAP GROWTH PORTFOLIO 15.85 21.82 -2.81 3.48
Russell 2000 Growth Index 17.97 23.23 -2.54 4.37
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(8) The performance rankings are for the Class A shares of the Fund.
(9) The Lipper Performance Group is identical to the Lipper Expense Group.
(10) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(11) The performance returns are for the Class A shares of the Fund.
(12) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
22
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
JUNE 30, 2006
SEMI-ANNUAL REPORT
ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
========================================
o ARE NOT FDIC INSURED
o MAY LOSE VALUE
o ARE NOT BANK GUARANTEED
========================================
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEINR AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE MARKS
USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
GLOBAL TECHNOLOGY PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
GLOBAL TECHNOLOGY PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- -------------------------------------------------------------------------------------------------------------
CLASS A
Actual $ 1,000 $ 955.24 $ 4.46 0.92%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,020.23 $ 4.61 0.92%
CLASS B
Actual $ 1,000 $ 953.94 $ 5.67 1.17%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,018.99 $ 5.86 1.17%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
_______________________________________________________________________________
1
GLOBAL TECHNOLOGY PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
Google, Inc. Cl. A $ 14,802,349 6.2%
Cisco Systems, Inc. 11,885,957 4.9
QUALCOMM, Inc. 11,035,277 4.6
Microsoft Corp. 10,291,610 4.3
Apple Computer, Inc. 9,927,456 4.1
Canon, Inc. 9,598,472 4.0
SAP AG (ADR) 9,372,194 3.9
America Movil, SA de C.V. Series L (ADR) 8,640,948 3.6
Motorola, Inc. 8,638,305 3.6
Cap Gemini, SA 6,866,901 2.9
------------- -----
$ 101,059,469 42.1%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
SECTOR U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
Technology $ 206,566,429 86.1%
Consumer Services 16,138,013 6.7
Utilities 3,719,692 1.6
Capital Goods 2,745,118 1.1
Consumer Manufacturing 1,825,327 0.8
------------- ------
Total Investments* 230,994,579 96.3
Cash and receivables, net of liabilities 8,914,111 3.7
------------- ------
Net Assets $ 239,908,690 100.0%
COUNTRY DIVERSIFICATION
June 30, 2006 (unaudited)
COUNTRY U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
United States $ 146,779,657 61.2%
Japan 19,894,164 8.3
Taiwan 11,080,242 4.6
France 9,990,484 4.2
Germany 9,372,194 3.9
Mexico 8,640,948 3.6
South Korea 6,017,385 2.5
Netherlands 4,114,990 1.7
Finland 3,499,561 1.5
India 2,995,272 1.2
Other** 8,609,682 3.6
------------- ------
Total Investments* 230,994,579 96.3
Cash and receivables, net of liabilities 8,914,111 3.7
Net Assets $ 239,908,690 100.0%
------------- ------
* Excludes short-term investments.
** The Portfolio's country breakdown is expressed as a percentage of net
assets and may vary over time. "Other" represents less than 1.1% weightings in
the following countries: Bermuda, Guernsey, Italy, China and Russia.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
_______________________________________________________________________________
2
GLOBAL TECHNOLOGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- ------------------------------------------------------------
COMMON STOCKS
& OTHER
INVESTMENTS-96.3%
TECHNOLOGY-86.1%
COMMUNICATION
EQUIPMENT-18.6%
Alcatel, SA 247,628 $ 3,123,583
Ciena Corp. (a) 346,700 1,667,627
Cisco Systems, Inc. (a) 608,600 11,885,957
Finisar Corp. (a) 293,000 958,110
JDS Uniphase Corp. (a) 745,600 1,886,368
Juniper Networks, Inc. (a) 116,950 1,870,031
Motorola, Inc. 428,700 8,638,305
Nokia Oyj 172,624 3,499,561
QUALCOMM, Inc. 275,400 11,035,277
-------------
44,564,819
-------------
COMMUNICATION
SERVICES-0.8%
NeuStar, Inc. Cl. A (a) 55,200 1,863,000
-------------
COMPUTER HARDWARE/
STORAGE/
PERIPHERALS-13.2%
Apple Computer, Inc. (a) 173,800 9,927,456
Electronics for Imaging,
Inc. (a) 32,200 672,336
High Tech Computer Corp. 66,000 1,814,200
International Business
Machines Corp. (IBM) 76,500 5,876,730
NEC Corp. 520,000 2,773,411
Network Appliance, Inc. (a) 151,000 5,330,300
QLogic Corp. (a) 33,800 582,712
Sun Microsystems, Inc. (a) 1,152,300 4,782,045
-------------
31,759,190
-------------
COMPUTER
SERVICES-7.8%
Alliance Data Systems
Corp. (a) 59,800 3,517,436
Cap Gemini, SA 120,411 6,866,901
Cognizant Technology
Solutions Corp. Cl. A (a) 36,300 2,445,531
Fiserv, Inc. (a) 63,725 2,890,566
Infosys Technologies
Ltd. (ADR) 39,200 2,995,272
-------------
18,715,706
-------------
CONTRACT
MANUFACTURING-0.8%
HON HAI Precision
Industry Co., Ltd.
(Citigroup Global Markets),
warrants expiring
1/17/07 (a)(b) 304,934 1,883,617
-------------
ELECTRONIC
COMPONENTS-1.8%
Foxconn Technology Co.,
Ltd. (a) 341,000 $ 2,735,844
Largan Precision Co., Ltd. 74,000 1,581,852
-------------
4,317,696
-------------
INTERNET-10.1%
Akamai Technologies, Inc. (a) 99,000 3,582,810
Fastweb (a) 50,719 2,202,340
Google, Inc. Cl. A (a) 35,300 14,802,349
Yahoo!, Inc. (a) 112,400 3,709,200
-------------
24,296,699
-------------
SEMICONDUCTOR
CAPITAL
EQUIPMENT-1.7%
ASML Holding N.V. (a) 203,504 4,114,990
-------------
SEMICONDUCTOR
COMPONENTS-9.0%
Advanced Micro Devices,
Inc. (a) 76,500 1,868,130
Broadcom Corp. Cl. A (a) 157,250 4,725,363
Hynix Semiconductor, Inc.
(GDR) (a)(b) 9,100 294,957
Hynix Semiconductor, Inc.
(UBS), warrants expiring
4/27/07 (a) 93,600 3,020,472
Intersil Corp. Cl. A 120,000 2,790,000
Marvell Technology Group
Ltd. (a) 26,300 1,165,879
PMC-Sierra, Inc. (a) 236,400 2,222,160
Samsung Electronics Co., Ltd.
(GDR) (b) 7,733 2,457,573
SiRF Technology Holdings,
Inc. (a) 37,400 1,205,028
Taiwan Semiconductor
Manufacturing Co., Ltd.
(ADR) 198,570 1,822,873
-------------
21,572,435
-------------
SOFTWARE-16.5%
Adobe Systems, Inc. 117,800 3,576,408
Amdocs Ltd. (a) 67,600 2,474,160
BEA Systems, Inc. (a) 308,200 4,034,338
Citrix Systems, Inc. (a) 84,100 3,375,774
Microsoft Corp. 441,700 10,291,610
Omniture, Inc. (a) 72,700 529,983
Oracle Corp. (a) 190,000 2,753,100
Red Hat, Inc. (a) 64,800 1,516,320
Salesforce.com, Inc. (a) 66,100 1,762,226
SAP AG (ADR) 178,450 9,372,194
-------------
39,686,113
-------------
_______________________________________________________________________________
3
GLOBAL TECHNOLOGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- ------------------------------------------------------------
MISCELLANEOUS-5.8%
Canon, Inc. 195,850 $ 9,598,472
Hoya Corp. 117,800 4,193,692
-------------
13,792,164
-------------
206,566,429
-------------
CONSUMER
SERVICES-6.7%
ADVERTISING-1.1%
aQuantive, Inc. (a) 104,100 2,636,853
-------------
BROADCASTING &
CABLE-1.2%
News Corp. Cl. A 151,300 2,901,934
-------------
CELLULAR
COMMUNICATIONS-4.2%
America Movil, SA de C.V.
Series L (ADR) 259,800 8,640,948
Vimpel-Communications OAO
(ADR) (a) 31,500 1,443,330
-------------
10,084,278
-------------
RESTAURANT &
LODGING-0.1%
Ctrip.com International Ltd.
(ADR) 5,300 270,565
-------------
RETAIL - GENERAL
MERCHANDISE-0.1%
Gmarket, Inc. (ADR) (a) 15,900 244,383
-------------
16,138,013
-------------
UTILITIES-1.6%
TELEPHONE UTILITY-1.6%
AT&T, Inc. 95,600 2,666,284
Comstar United Telesystems
(GDR) (b) 181,622 1,053,408
-------------
3,719,692
-------------
CAPITAL GOODS-1.1%
ELECTRICAL
EQUIPMENT-0.5%
AU Optronics Corp. (CSFB),
warrants expiring
5/03/09 (a) 882,000 $ 1,241,856
-------------
MISCELLANEOUS-0.6%
NITTO DENKO Corp. 21,100 1,503,262
-------------
2,745,118
-------------
CONSUMER
MANUFACTURING-0.8%
APPLIANCES-0.8%
Sony Corp. 41,400 1,825,327
-------------
Total Common Stocks &
Other Investments
(cost $213,200,567) 230,994,579
-------------
SHORT-TERM
INVESTMENT-2.2%
TIME DEPOSIT-2.2%
The Bank of New York
4.25%, 7/03/06
(cost $5,300,000) $5,300 5,300,000
-------------
TOTAL
INVESTMENTS-98.5%
(cost $218,500,567) 236,294,579
Other assets less
liabilities-1.5% 3,614,111
-------------
NET ASSETS-100% $ 239,908,690
=============
(a) Non-income producing security.
(b) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $5,689,555 or 2.4% of net assets.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See Notes to Financial Statements.
_______________________________________________________________________________
4
GLOBAL TECHNOLOGY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $218,500,567) $ 236,294,579
Cash 95,711
Foreign cash, at value (cost $4,299,591) 4,311,545
Receivable for investment securities sold and foreign currency contracts 2,685,837
Receivable for capital stock sold 341,780
Dividends and interest receivable 147,986
-------------
Total assets 243,877,438
-------------
LIABILITIES
Payable for investment securities purchased and foreign currency contracts 3,477,253
Payable for capital stock redeemed 193,327
Advisory fee payable 155,414
Distribution fee payable 33,057
Administrative fee payable 19,607
Transfer agent fee payable 119
Accrued expenses 89,971
-------------
Total liabilities 3,968,748
-------------
NET ASSETS $ 239,908,690
=============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 15,995
Additional paid-in capital 487,467,955
Accumulated net investment loss (553,361)
Accumulated net realized loss on investment and foreign currency transactions (264,828,682)
Net unrealized appreciation of investments and foreign currency denominated assets
and liabilities 17,806,783
-------------
$ 239,908,690
=============
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- ---------------------------------------------------------------------------------------------------------
A $ 85,934,580 5,670,910 $ 15.15
B $ 153,974,110 10,323,684 $ 14.91
See Notes to Financial Statements.
_______________________________________________________________________________
5
GLOBAL TECHNOLOGY PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $64,623) $ 759,785
Interest 114,215
-------------
Total investment income 874,000
-------------
EXPENSES
Advisory fee 961,496
Distribution fee--Class B 198,023
Transfer agency--Class A 1,140
Transfer agency--Class B 1,907
Custodian 89,150
Printing 65,359
Administrative 39,000
Audit 20,248
Legal 6,664
Directors' fees 519
Miscellaneous 8,152
-------------
Total expenses 1,391,658
-------------
Net investment loss (517,658)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 16,394,759
Foreign currency transactions (150,303)
Net change in unrealized appreciation/depreciation of:
Investments (27,671,753)
Foreign currency denominated assets and liabilities 64,430
-------------
Net loss on investment and foreign currency transactions (11,362,867)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (11,880,525)
=============
See Notes to Financial Statements.
_______________________________________________________________________________
6
GLOBAL TECHNOLOGY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
---------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (517,658) $ (1,146,449)
Net realized gain on investment and foreign currency transactions 16,244,456 31,366,066
Net change in unrealized appreciation/depreciation of investments and
foreign currency denominated assets and liablilties (27,607,323) (23,522,677)
------------- -------------
Net increase (decrease) in net assets from operations (11,880,525) 6,696,940
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 3,933,191 (40,707,523)
------------- -------------
Total decrease (7,947,334) (34,010,583)
NET ASSETS
Beginning of period 247,856,024 281,866,607
------------- -------------
End of period (including accumulated net investment loss of
($553,361) and ($35,703), respectively) $ 239,908,690 $ 247,856,024
============= =============
See Notes to Financial Statements.
_______________________________________________________________________________
7
GLOBAL TECHNOLOGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Global Technology Portfolio (the "Portfolio") is a series
of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's objective was to seek growth of capital.
Current income was incidental to the Portfolio's objective. The Portfolio is
diversified as defined under the Investment Company Act of 1940. The Fund was
incorporated in the State of Maryland on November 17, 1987, as an open-end
series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
_______________________________________________________________________________
8
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date or as soon as the Porfolio
is informed of the dividend. Interest income is accrued daily. Investment
transactions are accounted for on the date securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Portfolio amortizes premiums and accretes discounts as adjustments to interest
income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of 1% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
_______________________________________________________________________________
9
GLOBAL TECHNOLOGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $365,370, of which $4,552 and $0, respectively, was
paid to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited,
affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
------------- -------------
Investment securities (excluding U.S. government
securities) $ 147,620,263 $ 151,082,057
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordngly, gross unrealized
appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 28,265,887
Gross unrealized depreciation (10,471,875)
-------------
Net unrealized appreciation $ 17,794,012
=============
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
_______________________________________________________________________________
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
---------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
---------------- ------------ ---------------- -------------
CLASS A
Shares sold 212,374 751,250 $ 3,474,489 $ 10,960,123
Shares redeemed (831,078) (2,135,549) (13,390,585) (31,171,724)
--------- --------- ------------- -------------
Net decrease (618,704) (1,384,299) $ (9,916,096) $ (20,211,601)
========= ========= ============= =============
CLASS B
Shares sold 2,033,671 1,461,398 $ 32,722,388 $ 21,513,107
Shares redeemed (1,181,544) (2,912,902) (18,873,101) (42,009,029)
--------- --------- ------------- -------------
Net increase (decrease) 852,127 (1,451,504) $ 13,849,287 $ (20,495,922)
========= ========= ============= =============
_______________________________________________________________________________
11
GLOBAL TECHNOLOGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT)
The tax character of ditributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. As of December
31, 2005, the components of accumulated earnings/(deficit) on a tax basis were
as follows:
Accumulated capital and other losses $ (279,857,006)(a)
Unrealized appreciation/(depreciation) 44,162,271(b)
--------------
Total accumulated earnings/(deficit) $ (235,694,735)
==============
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$279,821,303 of which $86,279,696 expires in the year 2009, $172,308,210
expires in the year 2010, and $21,233,397 expires in the year 2011. To the
extent future capital gains are offset by capital loss carryforwards, such
gains will not be distributed. During the current fiscal year, the Portfolio
utilized capital loss carryforwards of $26,434,489. Net capital losses and net
foreign currency losses incurred after October 31, and within the taxable year
are deemed to arise on the first business day of Portfolio's next taxable year.
For the year ended December 31, 2005, the Portfolio deferred to January 1,
2006, post October foreign currency losses of $35,703.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
_______________________________________________________________________________
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until December 31,
2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
_______________________________________________________________________________
13
GLOBAL TECHNOLOGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
_______________________________________________________________________________
14
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
_______________________________________________________________________________
15
GLOBAL TECHNOLOGY PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 -------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.86 $ 15.27 $ 14.49 $ 10.05 $ 17.24 $ 24.95
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.02) (.05) (.03)(b) (.11 ) (.13) (.12)
Net realized and unrealized gain (loss)
on investment transactions (.69) .64 .81 4.55 (7.06) (5.92)
Net increase (decrease) in net asset
value from operations (.71) .59 .78 4.44 (7.19) (6.04)
LESS: DISTRIBUTIONS
Distributions from net realized gain on
investment transactions -0- -0- -0- -0- -0- (.11)
Distributions in excess of net realized
gain on investment transactions -0- -0- -0- -0- -0- (1.56)
Total distributions -0- -0- -0- -0- -0- (1.67)
Net asset value, end of period $ 15.15 $ 15.86 $ 15.27 $ 14.49 $ 10.05 $ 17.24
TOTAL RETURN
Total investment return based on
net asset value (c) (4.48)% 3.86% 5.38% 44.18% (41.71)% (25.23)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $85,935 $99,781 $117,145 $130,127 $93,369 $235,252
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .92%(d)(e) .92% .88% 1.11% 1.20% 1.08%
Expenses, before waivers and
reimbursements .92%(d)(e) .92% 1.06% 1.11% 1.20% 1.08%
Net investment loss (.24)%(d)(e) (.32)% (.22)%(b) (.86 )% (1.01)% (.64)%
Portfolio turnover rate 60% 98% 86% 90% 68% 40%
See footnote summary on page 17.
_______________________________________________________________________________
16
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 -------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.63 $ 15.08 $ 14.35 $ 9.98 $ 17.15 $ 24.90
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.04) (.08) (.07)(b) (.14) (.16) (.17)
Net realized and unrealized gain (loss)
on investment transactions (.68) .63 .80 4.51 (7.01) (5.91)
Net increase (decrease) in net asset
value from operations (.72) .55 .73 4.37 (7.17) (6.08)
LESS: DISTRIBUTIONS
Distributions from net realized gain on
investment transactions -0- -0- -0- -0- -0- (.11)
Distributions in excess of net realized
gain on investment transactions -0- -0- -0- -0- -0- (1.56)
Total distributions -0- -0- -0- -0- -0- (1.67)
Net asset value, end of period $ 14.91 $ 15.63 $ 15.08 $ 14.35 $ 9.98 $17.15
TOTAL RETURN
Total investment return based on
net asset value (c) (4.61)% 3.65% 5.09% 43.79% (41.81)% (25.45)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $153,974 $148,075 $164,721 $187,319 $99,528 $179,076
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.17%(d)(e) 1.17% 1.13% 1.37% 1.46% 1.33%
Expenses, before waivers and
reimbursements 1.17%(d)(e) 1.17% 1.31% 1.37% 1.46% 1.33%
Net investment loss (.48)%(d)(e) (.57)% (.47)%(b) (1.11)% (1.27)% (.92)%
Portfolio turnover rate 60% 98% 86% 90% 68% 40%
(a) Based on average shares outstanding.
(b) Net of expenses reimbursed or waived 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
_______________________________________________________________________________
17
GLOBAL TECHNOLOGY PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Global Technology Portfolio (the "Fund"), prepared by Philip
L. Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Specialty 75 bp on 1st $2.5 billion Global Technology Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Global Technology Portfolio $69,000 0.02%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
_______________________________________________________________________________
18
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Global Technology Portfolio Class A 1.06% December 31
Class B 1.31%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has almost the same advisory fee schedule as
the Fund.(3)
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE
- -------------------------------------------------------------------------------
International Technology 1.20%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
(3) The advisory fee breakpoints of the Fund and the AllianceBernstein Global
Technology Fund, Inc. (the other AllianceBernstein Mutual Fund) are the same.
However, the advisory fees of the AllianceBernstein Global Technology Fund,
Inc. are paid on a quarterly basis and are based on the fund's net assets at
the end of each quarter, in contrast to the Fund, whose advisory fees are paid
on a monthly basis and are based on the Fund's average daily net assets.
_______________________________________________________________________________
19
GLOBAL TECHNOLOGY PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Global Technology Portfolio 0.750 0.750 3/8
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(7) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Global Technology
Portfolio 0.882 0.884 19/39 0.851 6/8
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice
(4) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(5) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(6) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(7) Most recent fiscal year end Class A share total expense ratio.
_______________________________________________________________________________
20
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
precludes the Adviser's affiliates from earning a reasonable profit on this
type of relationship. These affiliates provide transfer agent, distribution,
and brokerage related services to the Fund and receive transfer agent fees,
Rule 12b-1 payments and commissions for providing brokerage services. In
addition, the Adviser benefits from soft dollar arrangements which offset
expenses the Adviser would otherwise incur. Additional information regarding
distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Global Technology Portfolio $427,447
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Global Technology Portfolio $643,193
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(8) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of
(8) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
_______________________________________________________________________________
21
GLOBAL TECHNOLOGY PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
scale were being passed on to the shareholders. It is contemplated that
additional work will be performed to determine if the benefits of economies of
scale or scope are being passed to shareholders by the Adviser. In the
meantime, it is clear that to the extent the Fund's assets exceed the initial
breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, and 5 year performance
rankings of the Fund(9) relative to its Lipper Performance Group(10) and Lipper
Performance Universe(11) for the period ended September 30, 2005.
GLOBAL TECHNOLOGY PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 5/8 29/40
3 year 7/8 26/40
5 year 1/7 14/23
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(12) versus its benchmark(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
GLOBAL TECHNOLOGY PORTFOLIO 14.31 19.84 -13.86 5.88
MSCI World IT Index (Net) 13.53 22.05 -14.41 n/a
Goldman Sachs Technology
Composite Index 13.83 24.39 -15.24 n/a
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(9) The performance rankings are for the Class A shares of the Fund.
(10) The Lipper Performance Group is identical to the Lipper Expense Group.
(11) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(12) The performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
_______________________________________________________________________________
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN INTERNATIONAL GROWTH PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
INTERNATIONAL GROWTH PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
INTERNATIONAL GROWTH PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ------------------------------ --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,078.38 $6.29 1.22%
Hypothetical (5% return before expenses) $1,000 $1,018.74 $6.11 1.22%
CLASS B
Actual $1,000 $1,076.51 $7.57 1.47%
Hypothetical (5% return before expenses) $1,000 $1,017.50 $7.35 1.47%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
INTERNATIONAL GROWTH PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Nomura Holdings, Inc. $ 2,841,487 2.8%
Mitsubishi UFJ Financial Group, Inc. 2,453,139 2.5
Toyota Motor Corp. 2,189,874 2.2
ING Groep NV 2,025,337 2.0
Banco Bilbao Vizcaya Argentaria, SA 1,975,605 2.0
HSBC Holdings Plc 1,926,607 1.9
OPAP, SA 1,867,394 1.9
Nestle, SA 1,844,384 1.8
Credit Suisse Group 1,821,724 1.8
SAP AG 1,821,088 1.8
------------ -----
$ 20,766,639 20.7%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Finance $ 27,407,151 27.4%
Consumer Services 14,181,388 14.2
Technology 9,256,666 9.2
Energy 9,219,608 9.2
Consumer Staples 7,879,364 7.9
Health Care 7,289,873 7.3
Utilities 6,239,520 6.2
Consumer Manufacturing 6,050,412 6.0
Basic Industry 4,002,297 4.0
Transportation 3,113,124 3.1
Capital Goods 2,668,422 2.7
Aerospace & Defense 1,840,653 1.8
Multi-Industry Companies 451,328 0.5
------------ -----
Total Investments 99,599,806 99.5
Cash and receivables, net of liabilities 522,502 0.5
------------ -----
Net Assets $100,122,308 100.0%
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
INTERNATIONAL GROWTH PORTFOLIO
COUNTRY DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COUNTRY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Japan $ 16,362,167 16.3%
United Kingdom 12,380,319 12.4
France 11,787,959 11.8
Switzerland 7,713,160 7.7
Brazil 4,904,412 4.9
Germany 4,150,530 4.1
China 3,604,273 3.6
Spain 3,341,243 3.3
South Africa 3,187,742 3.2
Italy 3,123,519 3.1
Netherlands 2,852,909 2.8
South Korea 2,660,979 2.7
Mexico 2,594,719 2.6
Ireland 2,373,701 2.4
Australia 2,097,181 2.1
Russia 2,095,258 2.1
Greece 1,867,394 1.9
Taiwan 1,642,059 1.6
Norway 1,540,277 1.5
Turkey 1,380,326 1.4
India 1,154,071 1.2
Israel 987,742 1.0
Austria 960,703 1.0
Other* 4,837,163 4.8
------------ -----
Total Investments 99,599,806 99.5
Cash and receivables, net of liabilities 522,502 0.5
------------ -----
Net Assets $100,122,308 100.0%
* The Portfolio's country breakdown is expressed as a percentage of net
assets and may vary over time. "Other" represents less than 1% weightings in
the following countries: Chile, Egypt, Hong Kong, Hungary, Luxembourg,
Malaysia, Poland, Singapore and Thailand.
3
INTERNATIONAL GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-99.5%
FINANCE-27.4%
BANKING - MONEY CENTER-14.3%
Allied Irish Banks Plc 43,574 $ 1,042,742
Banco Bilbao Vizcaya Argentaria, SA 96,009 1,975,605
Banco Santander Chile SA (ADR) 6,300 254,142
Bank Hapoalim BM 124,058 542,323
BNP Paribas, SA 18,145 1,735,102
Commerzbank AG 28,195 1,020,921
Credit Suisse Group 32,652 1,821,724
HSBC Holdings Plc 109,496 1,926,607
ICICI Bank Ltd. 26,733 283,294
Kookmin Bank 14,790 1,218,579
Mitsubishi UFJ Financial Group, Inc. 175 2,453,139
------------
14,274,178
BANKING - REGIONAL-2.9%
China Construction Bank (a) 2,872,000 1,311,534
Macquarie Bank Ltd. 17,396 890,481
Turkiye Is Bankasi 152,406 739,696
------------
2,941,711
BROKERAGE & MONEY MANAGEMENT-2.8%
Nomura Holdings, Inc. 151,300 2,841,487
INSURANCE-4.2%
ING Groep NV 51,591 2,025,337
Prudential Plc 114,390 1,293,517
Swiss Reinsurance 12,784 891,930
------------
4,210,784
REAL ESTATE - OTHER-0.4%
Urbi, Desarrollos Urbanos, SA de CV (b) 153,900 356,889
MISCELLANEOUS-2.8%
FirstRand Ltd. 394,071 923,007
Itausa-Investimentos Itau, SA pfd. (b) 384,907 1,544,320
ORIX Corp. 1,290 314,775
------------
2,782,102
------------
27,407,151
CONSUMER SERVICES-14.2%
ADVERTISING-0.8%
WPP Group Plc 69,749 843,135
AIRLINES-0.5%
easyJet Plc (b) 73,148 522,466
BROADCASTING & CABLE-2.3%
Grupo Televisa, SA (ADR) 24,400 471,164
SES Global, SA 47,792 676,736
Societe Television Francaise 1 35,409 1,153,651
------------
2,301,551
CELLULAR COMMUNICATIONS-3.3%
America Movil, SA de CV Series L (ADR) 43,300 1,440,158
Bharti Airtel Ltd. (b) 70,232 565,451
Orascom Telecom Holding SAE (GDR) 14,721 603,485
Turkcell Iletisim Hizmet AS 138,302 640,630
------------
3,249,724
ENTERTAINMENT & LEISURE-1.9%
OPAP, SA 51,384 1,867,394
Namco Bandai Holdings, Inc. 50 762
------------
1,868,156
PRINTING & PUBLISHING-0.8%
Naspers Ltd. 44,541 757,057
RESTAURANTS & LODGING-1.4%
Accor, SA 22,922 1,394,474
RETAIL - GENERAL MERCHANDISE-1.0%
Next Plc 33,116 998,003
MISCELLANEOUS-2.2%
Capita Group Plc 66,770 569,283
First Choice Holidays Plc 174,234 735,865
Li & Fung Ltd. 390,000 790,428
Michael Page International Plc 23,357 151,246
------------
2,246,822
------------
14,181,388
TECHNOLOGY-9.2%
COMMUNICATION EQUIPMENT-0.8%
Vimpel-Communications OAO (ADR) (b) 18,100 829,342
COMMUNICATION SERVICES-0.3%
Comstar United Telesystems (GDR) (a) 52,408 303,966
COMPUTER HARDWARE/STORAGE-0.6%
NEC Corp. 108,000 576,016
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMPUTER SERVICES-0.4%
Indra Sistemas, SA 20,653 $ 405,218
ELECTRONIC COMPONENTS-0.7%
LG.Philips LCD Co., Ltd.
(ADR) (b) 39,900 722,988
INTERNET INFRASTRUCTURE-1.5%
Fastweb (b) 35,161 1,526,775
SEMICONDUCTOR CAPITAL EQUIPMENT-0.8%
ASML Holding NV (b) 40,927 827,572
SEMICONDUCTOR COMPONENTS-1.7%
Advanced Semiconductor Engineering, Inc. 424,919 420,585
Taiwan Semiconductor Manufacturing Co., Ltd. 455,773 828,258
Taiwan Semiconductor Manufacturing Co., Ltd.
(ADR) 42,834 393,216
------------
1,642,059
SOFTWARE-1.8%
SAP AG 8,667 1,821,088
MISCELLANEOUS-0.6%
Hoya Corp. 16,900 601,642
------------
9,256,666
ENERGY-9.2%
INTERNATIONAL-8.1%
Arkema rights, expiring 6/26/06 (b) 4 16
China Petroleum & Chemical Corp. 2,036,000 1,167,400
Eni S.p.A 54,361 1,596,744
LUKOIL (ADR) 8,748 731,333
Norsk Hydro ASA 58,075 1,540,277
Petroleo Brasileiro, SA (ADR) (b) 18,000 1,437,120
Total, SA 24,536 1,611,814
------------
8,084,704
OIL SERVICE-1.1%
Polski Koncern Naftowy Orlen, SA 23,683 395,009
PTT Public Co., Ltd. 124,800 739,895
------------
1,134,904
------------
9,219,608
CONSUMER STAPLES-7.9%
BEVERAGES-2.5%
Fomento Economico Mexicano, SA de CV (ADR) 3,900 326,508
Pernod-Ricard, SA 7,242 1,434,353
SABMiller Plc 41,238 742,388
------------
2,503,249
FOOD-1.8%
Nestle, SA 5,883 1,844,384
RETAIL - FOOD & DRUG-0.6%
Tesco Plc 93,582 577,685
TOBACCO-3.0%
Altadis, SA 11,983 565,832
British American Tobacco Plc 38,286 963,938
Japan Tobacco, Inc. 390 1,424,276
------------
2,954,046
------------
7,879,364
HEALTH CARE-7.3%
DRUGS-6.9%
Chugai Pharmaceutical Co., Ltd. 52,500 1,071,998
CSL Ltd. 30,259 1,206,700
Gedeon Richter Rt. 2,443 449,016
Novartis AG 21,815 1,177,279
Roche Holding AG 6,898 1,138,257
Sanofi-Aventis, SA 14,625 1,424,920
Teva Pharmaceutical Industries Ltd. (ADR) 14,100 445,419
------------
6,913,589
MEDICAL SERVICES-0.4%
Rhoen-Klinikum AG 8,453 376,284
------------
7,289,873
UTILITIES-6.2%
ELECTRIC & GAS UTILITY-3.3%
CPFL Energia, SA (ADR) 9,400 343,570
Gaz de France 20,330 681,653
National Grid Plc 104,941 1,133,894
Red Electrica de Espana 11,434 394,588
Scottish Power Plc 74,420 801,664
------------
3,355,369
TELEPHONE UTILITY-2.9%
Egyptian Co. for Moblie Services 7,440 168,127
MTN Group Ltd. 51,640 379,791
Nippon Telegraph & Telephone Corp. 126 615,205
Singapore Telecommunications Ltd. 284,000 456,154
Telekom Austria AG 43,150 960,703
Telekom Malaysia Berhad 123,500 304,171
------------
2,884,151
------------
6,239,520
5
INTERNATIONAL GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
CONSUMER MANUFACTURING-6.0%
AUTO & RELATED-3.1%
Honda Motor Co., Ltd. 19,400 $ 616,224
Tata Motors Ltd. 17,660 305,326
Toyota Motor Corp. 41,900 2,189,874
------------
3,111,424
BUILDING & RELATED-2.9%
CRH Plc 40,884 1,330,959
Vinci, SA 15,637 1,608,029
------------
2,938,988
------------
6,050,412
BASIC INDUSTRY-4.0%
CHEMICALS-0.0%
Arkema (b) 613 23,922
MINING & METALS-4.0%
China Shenhua Energy Co., Ltd. 606,500 1,125,339
Cia Vale do Rio Doce-SP (ADR) 30,300 728,412
Cia Vale do Rio Doce (ADR) 24,200 498,036
Gold Fields Ltd. 29,944 676,559
Mechel OAO (ADR) 10,300 230,617
POSCO 2,679 719,412
------------
3,978,375
------------
4,002,297
TRANSPORTATION-3.1%
RAILROAD-2.2%
All America Latina Logistica, SA (GDR) (a) 5,200 352,954
Central Japan Railway Co. 129 1,285,208
East Japan Railway Co. 73 542,725
------------
2,180,887
MISCELLANEOUS-0.9%
Fraport AG 13,062 932,237
------------
3,113,124
CAPITAL GOODS-2.7%
ELECTRICAL EQUIPMENT-0.7%
Yamada Denki Co., Ltd. 6,300 641,877
ENGINEERING & CONSTRUCTION-1.3%
ABB Ltd. 64,663 839,586
Obayashi Corp. 69,000 474,513
------------
1,314,099
MISCELLANEOUS-0.7%
Nitto Denko Corp. 10,000 712,446
------------
2,668,422
AEROSPACE & DEFENSE-1.8%
AEROSPACE-1.8%
BAE Systems Plc 164,036 1,120,628
European Aeronautic Defence and Space Co. NV 25,100 720,025
------------
1,840,653
MULTI-INDUSTRY COMPANIES-0.5%
Barloworld Ltd. 26,744 451,328
Total Common Stocks & Other Investments
(cost $80,019,625) 99,599,806
TOTAL INVESTMENTS-99.5%
(cost $80,019,625) 99,599,806
Other assets less liabilities-0.5% 522,502
NET ASSETS-100% $100,122,308
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $1,968,454 or 2.0% of net assets.
(b) Non-income producing security.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
pfd. - Preferred Stock
See Notes to Financial Statements.
6
INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $80,019,625) $ 99,599,806
Foreign cash, at value (cost $1,701,832) 1,677,347
Dividends receivable 250,595
Receivable for investment securities sold and foreign
currency contracts 126,507
Receivable for capital stock sold 28,189
Total assets 101,682,444
LIABILITIES
Due to custodian 988,320
Payable for investment securities purchased and foreign
currency contracts 261,670
Payable for capital stock redeemed 122,261
Advisory fee payable 64,864
Administrative fee payable 19,607
Foreign capital gains tax payable 8,628
Distribution fee payable 6,132
Transfer agent fee payable 123
Accrued expenses 88,531
Total liabilities 1,560,136
NET ASSETS $ 100,122,308
COMPOSITION OF NET ASSETS
Capital stock, at par $ 3,889
Additional paid-in capital 71,159,898
Undistributed net investment income 720,899
Accumulated net realized gain on investment and foreign
currency transactions 8,702,443
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 19,535,179
$ 100,122,308
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $71,358,785 2,768,386 $25.78
B $28,763,523 1,120,807 $25.66
See Notes to Financial Statements.
7
INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $152,833) $ 1,590,885
Interest 38,715
Total investment income 1,629,600
EXPENSES
Advisory fee 378,101
Distribution fee--Class B 36,951
Transfer agency--Class A 1,182
Transfer agency--Class B 479
Custodian 155,826
Administrative 39,000
Printing 23,352
Audit 20,248
Legal 1,917
Directors' fees 637
Miscellaneous 2,170
Total expenses 659,863
Net investment income 969,737
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain on:
Investment transactions 8,658,681
Foreign currency transactions 82,655
Net change in unrealized appreciation/depreciation of:
Investments (3,803,260)(a)
Foreign currency denominated assets and liabilities (3,796)
Net gain on investment and foreign currency transactions 4,934,280
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,904,017
(a) Net of accrued foreign capital gains taxes of $20,472.
See Notes to Financial Statements.
8
INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 969,737 $ 704,674
Net realized gain on investment and
foreign currency transactions 8,741,336 4,905,337
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (3,807,056) 7,379,925
Net increase in net assets from
operations 5,904,017 12,989,936
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (654,473) (185,286)
Class B (210,045) (63,431)
Net realized gain on investment and
foreign currency transactions
Class A (436,315) -0-
Class B (172,059) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 12,038,598 15,212,895
Total increase 16,469,723 27,954,114
NET ASSETS
Beginning of period 83,652,585 55,698,471
End of period (including undistributed
net investment income of $720,899
and $615,680, respectively) $ 100,122,308 $ 83,652,585
See Notes to Financial Statements.
9
INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein International Growth Portfolio (the "Portfolio"),
formerly AllianceBernstein Worldwide Privatization Portfolio, is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
portfolio's investment objective is long-term growth of capital. Prior to
February 1, 2006, the Portfolio's investment objective was to seek long-term
capital appreciation. The Portfolio is diversified as defined under the
Investment Company Act of 1940. The Fund was incorporated in the State of
Maryland on November 17, 1987, as an open-end series investment company. The
Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
interim and may materially affect the value of those securities. To account for
this, the Fund may frequently value many of its foreign equity securities using
fair value prices based on third party vendor modeling tools to the extent
available.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions and the difference between the amounts
of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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. Prior to September 7, 2004, under the
terms of an investment advisory agreement, the Portfolio paid the Adviser an
advisory fee at an annual rate of 1% of the Portfolio's average daily net
assets. The fee is accrued daily and paid monthly.
11
INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $215,189, none of which was paid to Sanford C.
Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 54,207,475 $ 39,585,961
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 21,803,234
Gross unrealized depreciation (2,223,053)
Net unrealized appreciation $ 19,580,181
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 889,476 878,813 $ 23,807,594 $ 19,401,201
Shares issued
in reinvestment
of dividends and
distributions 43,131 9,159 1,090,788 185,286
Shares redeemed (571,675) (521,594) (14,865,983) (11,132,269)
Net increase 360,932 366,378 $ 10,032,399 $ 8,454,218
CLASS B
Shares sold 282,154 492,423 $ 7,462,746 $ 10,378,684
Shares issued
in reinvestment
of dividends and
distributions 15,175 3,146 382,104 63,431
Shares redeemed (220,226) (172,820) (5,838,651) (3,683,438)
Net increase 77,103 322,749 $ 2,006,199 $ 6,758,677
13
INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 248,717 $ 90,868
Total taxable distributions 248,717 90,868
Total distributions paid $ 248,717 $ 90,868
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 856,676
Undistributed long term capital gain 604,300
Unrealized appreciation/(depreciation) 23,066,420(b)
Total accumulated earnings/(deficit) $ 24,527,396
(a) During the current fiscal year, the Portfolio utilized capital loss
carryforwards of $4,331,381.
(b) The difference between book-basis and tax-basis unrealized appreciation/
(depreciation) is attributable primarily to the tax deferral of losses on wash
sales, and the tax treatment of passive foreign investment companies.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
with the NYAG is memorialized in an Assurance of Discontinuance dated September
1, 2004 ("NYAG Order"). Among the key provisions of these agreements are the
following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
15
INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYA GOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
17
INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ --------- ------------
Net asset value,
beginning of period $24.27 $20.18 $16.28 $11.48 $12.18 $15.64
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (a) .27 .25 .11(b) .04 .07(b) .20(b)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 1.62 3.94 3.83 4.91 (.56) (2.82)
Net increase (decrease) in
net asset value from
operations 1.89 4.19 3.94 4.95 (.49) (2.62)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.23) (.10) (.04) (.15) (.21) (.03)
Distributions from net
realized gain on investment
and foreign currency
transactions (.15) -0- -0- -0- -0- (.81)
Total dividends and
Distributions (.38) (.10) (.04) (.15) (.21) (.84)
Net asset value, end of period $25.78 $24.27 $20.18 $16.28 $11.48 $12.18
TOTAL RETURN
Total investment return based
on net asset value (c) 7.84% 20.84% 24.27% 43.46% (4.19)% (17.29)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $71,359 $58,438 $41,198 $34,302 $27,136 $37,411
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.22%(d)(e) 1.41% 1.65% 2.17% 1.54% .95%
Expenses, before waivers
and reimbursements 1.22%(d)(e) 1.41% 1.81% 2.17% 1.98% 1.65%
Net investment income 2.03%(d)(e) 1.16% .65%(b) .34% .61%(b) 1.50%(b)
Portfolio turnover rate 41% 43% 60% 44% 46% 35%
See footnote summary on page 19.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -------------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
--------------- ------------ ------------ ------------ ----------- ------------
Net asset value,
beginning of period $24.16 $20.11 $16.24 $11.47 $12.17 $15.62
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (a) .22 .21 .07(b) .02 .03(b) .10(b)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 1.62 3.91 3.82 4.88 (.53) (2.71)
Net increase (decrease) in
net asset value from
operations 1.84 4.12 3.89 4.90 (.50) (2.61)
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
income (.19) (.07) (.02) (.13) (.20) (.03)
Distributions from net
realized gain on investment
and foreign currency
transactions (.15) -0- -0- -0- -0- (.81)
Total dividends and
Distributions (.34) (.07) (.02) (.13) (.20) (.84)
Net asset value,
end of period $25.66 $24.16 $20.11 $16.24 $11.47 $12.17
TOTAL RETURN
Total investment return based
on net asset value (c) 7.65% 20.55% 23.97% 43.07% (4.26)% (17.28)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $28,763 $25,215 $14,501 $7,376 $3,609 $1,092
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.47%(d)(e) 1.66% 1.90% 2.41% 1.79% 1.19%
Expenses, before waivers
and reimbursements 1.47%(d)(e) 1.66% 2.06% 2.41% 2.23% 1.93%
Net investment income 1.70%(d)(e) .95% .41%(b) .13% .28%(b) .80%(b)
Portfolio turnover rate 41% 43% 60% 44% 46% 35%
(a) Based on average shares outstanding.
(b) Net of expenses waived or 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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(e) Annualized.
19
INTERNATIONAL GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein International Growth Portfolio (the "Fund")(2), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(3)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
International 75 bp on 1st $2.5 billion International Growth Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
International Growth Portfolio $69,000 0.16%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Prior to February 1, 2006, the Fund was known as AllianceBernstein
Worldwide Privatization Portfolio.
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
International Growth Portfolio Class A 1.81% December 31
Class B 2.06%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the
Fund. However, with respect to the Fund, the Adviser represented that there are
no institutional products which have a substantially similar investment style
as the Fund.
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(4)
- -------------------------------------------------------------------------------
Global Growth 1.00%
(4) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
21
INTERNATIONAL GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedules of the
ACITM mutual funds with similar investment styles as the Fund are as follows:
FUND ACITM MUTUAL FUND(5) FEE
- -------------------------------------------------------------------------------
International Alliance Global Growth Opportunities 1.00%
Growth Portfolio (Nikko/Chuo Mitsui)
Alliance Global Growth 0.80%
Opportunities (Shinsei)(6)
Alliance Global Growth Opportunities 0.75%
(Mitsui)(6)
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(7)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
International Growth Portfolio 0.750 0.911 2/14
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(8) and Lipper Expense Universe(9). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(10) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
International
Growth Portfolio 1.646 1.044 41/43 1.153 12/14
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
(5) The name in parenthesis is the distributor of the fund.
(6) The ACITM fund is not a retail fund.
(7) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(8) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(9) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(10) Most recent fiscal year end Class A share total expense ratio.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
International Growth Portfolio $25,192
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
International Growth Portfolio $241,007
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(11) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
Although the Fund did not effect any brokerage transaction and pay commissions
to the Adviser's affiliate, Sanford C. Bernstein & Co. LLC, and/or its U.K.
based affiliate, Sanford C. Bernstein Ltd., (collectively "SCB"), during the
Fund's recent fiscal year, the potential for such events exist. The Adviser
represented that SCB's profitability from any business
(11) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
23
INTERNATIONAL GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
conducted with the Fund would be comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients. These
credits and charges are not being passed on to any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(12) relative to its Lipper Performance Group(13) and
Lipper Performance Universe(14) for the period ended September 30, 2005.
INTERNATIONAL GROWTH PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 1/14 1/43
3 year 1/14 2/43
5 year 3/13 4/35
10 year 1/10 2/26
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(15) versus its benchmark(16).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
INTERNATIONAL GROWTH
PORTFOLIO 35.72 31.89 8.69 11.40 11.39
MSCI World-USA
Index (Net) 26.82 25.35 3.40 6.24 6.19
(12) The performance rankings are for the Class A shares of the Fund.
(13) The Lipper Performance Group is identical to the Lipper Expense Group.
(14) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(15) The performance returns are for the Class A shares of the Fund.
(16) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
25
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN GLOBAL BOND PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
> ARE NOT FDIC INSURED
> MAY LOSE VALUE
> ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEIN(R) AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE
MARKS USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
GLOBAL BOND PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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.
GLOBAL BEGINNING ENDING EXPENSES ANNUALIZED
BOND ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 PERIOD* RATIO*
- -------------------------------------------------------------------------------
CLASS A
Actual $1,000 $1,021.61 $4.76 0.95%
Hypothetical
(5% return
before expenses) $1,000 $1,020.08 $4.76 0.95%
CLASS B
Actual $1,000 $1,019.96 $6.06 1.21%
Hypothetical
(5% return
before expenses) $1,000 $1,018.79 $6.06 1.21%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
GLOBAL BOND PORTFOLIO
SECURITY TYPE BREAKDOWN
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PERCENT OF
SECURITY TYPE U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Government Obligations $ 27,434,823 61.4%
Corporate Obligations 7,105,836 16.0
Total Investments* 34,540,659 77.4
Cash and receivables,
net of liabilities 10,106,480 22.6
Net Assets $44,647,139 100.0%
* Excludes short-term investments.
2
GLOBAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-77.4%
AUSTRALIA-1.7%
GOVERNMENT OBLIGATION-1.7%
Government of Australia
6.00%, 2/15/17(a) AUD 1,001 $ 756,340
BELGIUM-4.7%
GOVERNMENT OBLIGATION-4.7%
Kingdom of Belgium
4.25%, 9/28/14(a) EUR 473 614,601
5.50%, 3/28/28(a) 1,010 1,504,153
2,118,754
CAYMAN ISLANDS-0.3%
ENERGY-0.3%
Yorkshire Power Finance
7.25%, 8/04/28(a) GBP 65 142,376
DENMARK-1.2%
GOVERNMENT OBLIGATION-1.2%
Kingdom of Denmark
6.00%, 11/15/09(a) DKK 2,980 545,924
FINLAND-1.1%
GOVERNMENT OBLIGATION-1.1%
Government of Finland
5.375%, 7/04/13(A) EUR 360 499,882
GERMANY-14.7%
BANKING-4.8%
KFW Bankengruppe
2.05%, 2/16/26(a) JPY 21,000 177,065
Landwirtschaftliche Rentenbank
1.375%, 4/25/13(a) 229,000 1,951,691
2,128,756
GOVERNMENT OBLIGATION-9.9%
Deutschland Bundesrepublik
4.75%, 7/04/34(a) EUR 1,083 1,478,562
5.25%, 1/04/08(a) 2,247 2,944,735
4,423,297
6,552,053
JAPAN-18.0%
BANKING-0.4%
Development Bank of Japan
2.30%, 3/19/26(a) JPY 20,000 169,567
GOVERNMENT OBLIGATIONS-17.6%
Government of Japan
0.80%, 9/10/15(a) JPY 208,223 1,786,924
1.00%, 6/20/13(a) 233,450 1,947,669
1.90%, 3/20/25(a) 157,750 1,302,805
2.50%, 12/21/20(a) 81,800 747,038
Japan Finance Corp. for
Municipal Enterprises
1.55%, 2/21/12 (a) 241,000 2,108,401
7,892,837
8,062,404
LUXEMBOURG-0.2%
INDUSTRIAL-0.2%
Tyco International Group, SA
6.50%, 11/21/31(a) GBP 45 88,166
MEXICO-2.0%
BANKING-2.0%
Inter-American Development Bank
9.50%, 6/16/15(a) MXP 10,000 872,920
NORWAY-2.9%
GOVERNMENT OBLIGATION-2.9%
Government of Norway
6.00%, 5/16/11(a) NOK 7,418 1,286,667
SPAIN-4.5%
GOVERNMENT OBLIGATION-4.5%
Kingdom of Spain
6.15%, 1/31/13(a) EUR 1,387 1,997,110
SWEDEN-4.4%
BANKING-0.5%
Swedbank
5.75%, 12/31/49(a)(b) GBP 125 229,846
GOVERNMENT OBLIGATION-3.9%
Government of Sweden
5.25%, 3/15/11(a) SEK 11,705 1,725,478
1,955,324
UNITED KINGDOM-2.6%
BANKING-0.6%
Barclays Bank Plc
5.75%, 9/14/26(a) GBP 75 145,959
National Westminster
Bank Plc
6.50%, 9/07/21(a) 50 103,058
249,017
3
GLOBAL BOND PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMUNICATIONS-0.4%
British Telecommunications Plc
5.75%, 12/07/28(a) GBP 25 $ 43,720
Vodafone Group Plc
5.90%, 11/26/32(a) 70 130,649
174,369
GOVERNMENT OBLIGATION-1.2%
United Kingdom Treasury
4.00%, 3/07/09(a) 290 525,478
INSURANCE-0.4%
Friends Provident Plc
6.875%, 12/31/49(a)(b) 100 195,943
1,144,807
UNITED STATES-6.4%
CHEMICALS-0.4%
Pfizer, Inc.
1.80%, 2/22/16(a) JPY 20,000 167,851
FINANCIAL-4.4%
Citigroup, Inc.
4.625%, 8/03/10(a) USD 107 103,082
Genworth Financial, Inc.
1.60%, 6/20/11(a) JPY 75,000 642,545
International Lease Finance Corp.
3.50%, 4/01/09(a) USD 350 330,261
Pershing Road Development Co.
5.631%, 9/01/26(a)(b)(c) 660 660,000
SunTrust Bank
Series CD
5.358%, 6/02/09(a)(b) 250 250,443
1,986,331
RETAIL-1.6%
Wal-Mart Stores, Inc.
4.55%, 5/01/13(a) USD 750 700,694
2,854,876
U.S. GOVERNMENT AND GOVERNMENT
SPONSORED AGENCY OBLIGATIONS-12.7%
Federal Home Loan Mortgage Corp.
4.625%, 2/21/08(a) 2,449 2,416,133
4.75%, 1/19/16(a) 1,810 1,706,622
U.S. Treasury Bond
4.50%, 2/15/36(a) 820 735,246
U.S. Treasury Note
5.125%, 5/15/16 806 805,055
5,663,056
Total Long-Term Investments
(cost $34,757,735) 34,540,659
SHORT-TERM INVESTMENTS-21.5%
UNITED STATES-21.5%
TIME DEPOSITS-21.5%
Societe Generale
5.281%, 7/03/06 9,000 9,000,000
The Bank of New York
4.25%, 7/03/06 608 608,000
Total Short-Term Investments
(cost $9,608,000) 9,608,000
TOTAL INVESTMENTS-98.9%
(cost $44,365,735) 44,148,659
Other assets less liabilities-1.1% 498,480
NET ASSETS-100% $ 44,647,139
4
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
FORWARD EXCHANGE CURRENCY CONTRACTS (SEE NOTE D)
U.S. $
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
(000) DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------
BUY CONTRACTS:
Australian Dollar,
settling 7/14/06 538 $402,943 $ 399,375 $ (3,568)
British Pound,
settling 8/16/06 321 593,545 594,570 1,025
Canadian Dollar,
settling 7/10/06 2,043 1,856,598 1,830,219 (26,379)
Canadian Dollar,
settling 7/10/06 195 174,398 174,776 378
Canadian Dollar,
settling 7/10/06 1,636 1,475,470 1,465,756 (9,714)
Danish Krone,
settling 7/31/06 4,424 750,074 760,006 9,932
Euro,
settling 7/18/06 5,564 7,180,308 7,124,287 (56,021)
Euro,
settling 7/18/06 1,018 1,282,400 1,303,258 20,858
Euro,
settling 8/22/06 780 988,886 1,001,044 12,158
Japanese Yen,
settling 7/31/06 110,974 994,937 973,808 (21,129)
Japanese Yen,
settling 7/31/06 349,337 3,055,460 3,065,458 9,998
Japanese Yen,
settling 7/31/06 95,619 836,331 839,061 2,730
Norwegian Krone,
settling 7/27/06 841 137,957 135,368 (2,589)
SALE CONTRACTS:
Australian Dollar,
settling 7/14/06 250 185,000 185,838 (838)
Australian Dollar,
settling 7/14/06 238 174,009 176,791 (2,782)
Canadian Dollar,
settling 7/10/06 833 750,000 746,467 3,533
Danish Krone,
settling 7/31/06 2,682 460,930 460,793 137
Japanese Yen,
settling 7/31/06 271,866 2,375,000 2,385,648 (10,648)
Mexican Peso,
settling 7/24/06 10,255 892,620 903,243 (10,623)
Norwegian Krone,
settling 7/27/06 8,152 1,311,979 1,311,851 128
Swedish Krona,
settling 8/28/06 8,645 1,183,100 1,207,063 (23,963)
(a) Positions, or portion thereof, with an aggregate market value of
$30,990,846 have been segregated to collateralize forward exchange currency
contracts.
(b) Floating rate security. Stated interest rate was in effect at June 30,
2006.
(c) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security is considered liquid and may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At June
30, 2006, the aggregate market value of this security amounted to $660,000 or
1.5% of net assets.
Currency Abbreviations:
AUD - Australian Dollar
DKK - Danish Krone
EUR - Euro
GBP - British Pound
JPY - Japanese Yen
MXP - Mexican Peso
NOK - Norwegian Krone
SEK - Swedish Krona
USD - United States Dollar
See Notes to Financial Statements.
5
GLOBAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $44,365,735) $ 44,148,659
Foreign cash, at value (cost $630,557) 640,739
Unrealized appreciation of forward exchange
currency contracts 60,877
Receivable for investment securities sold and
foreign currency contracts 974,082
Interest receivable 512,935
Receivable for capital stock sold 7,112
Total assets 46,344,404
LIABILITIES
Due to custodian 17,496
Unrealized depreciation of forward exchange
currency contracts 168,254
Payable for investment securities purchased and
foreign currency contracts 1,157,190
Payable for capital stock redeemed 232,278
Advisory fee payable 19,854
Administrative fee payable 19,607
Distribution fee payable 2,767
Transfer agent fee payable 119
Accrued expenses 79,700
Total liabilities 1,697,265
NET ASSETS $ 44,647,139
COMPOSITION OF NET ASSETS
Capital stock, at par $ 3,969
Additional paid-in capital 46,516,339
Distributions in excess of net investment income (933,259)
Accumulated net realized loss on investment and
foreign currency transactions (634,774)
Net unrealized depreciation of investments and
foreign currency denominated
assets and liabilities (305,136)
$ 44,647,139
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $32,037,367 2,840,821 $11.28
B $12,609,772 1,127,723 $11.18
See Notes to Financial Statements.
6
GLOBAL BOND PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $4,125) $ 980,678
EXPENSES
Advisory fee 129,787
Distribution fee--Class B 16,182
Transfer agency--Class A 1,198
Transfer agency--Class B 349
Custodian 67,572
Administrative 39,000
Audit 20,248
Printing 16,521
Legal 1,835
Directors' fees 638
Miscellaneous 2,314
Total expenses 295,644
Net investment income 685,034
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions (300,738)
Foreign currency transactions 1,041,875
Net change in unrealized appreciation/depreciation of:
Investments (230,104)
Foreign currency denominated assets and liabilities (9,354)
Net gain on investment and foreign currency transactions 501,679
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,186,713
See Notes to Financial Statements.
7
GLOBAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 685,034 $ 1,494,560
Net realized gain on investment and
foreign currency transactions 741,137 1,454,072
Net change in unrealized appreciation/
depreciation of investments and
foreign currency denominated
assets and liabilities (239,458) (8,296,666)
Net increase (decrease) in net
assets from operations 1,186,713 (5,348,034)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (711,741) (4,802,045)
Class B (169,417) (1,253,227)
Net realized gain on investment and
foreign currency transactions
Class A (394,552) (612,506)
Class B (112,945) (163,892)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (15,579,825) 2,568,218
Total decrease (15,781,767) (9,611,486)
NET ASSETS
Beginning of period 60,428,906 70,040,392
End of period (including distributions
in excess of net investment income
of ($933,259) and ($737,135),
respectively) $ 44,647,139 $ 60,428,906
See Notes to Financial Statements.
8
GLOBAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Global Bond Portfolio (the "Portfolio") is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is to seek a high level of return from a
combination of current income and capital appreciation by investing in a
globally diversified portfolio of high quality debt securities denominated in
the U.S. dollar and a range of foreign currencies. The Portfolio is
non-diversified as defined under the Investment Company Act of 1940. The Fund
was incorporated in the State of Maryland on November 17, 1987, as an open-end
series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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.
9
GLOBAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Portfolio amortizes premiums and accretes discounts as
adjustments to interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
7. REPURCHASE AGREEMENTS
It is the policy of the Portfolio that its custodian or designated subcustodian
take control of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of collateral by the
Portfolio may be delayed or limited.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion,
..40% of the next $2.5 billion and .35% in excess of $5 billion, of the
Portfolio's average daily net assets. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .65% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
The Portfolio compensates AllianceBernstein Investor Services,Inc. (prior to
February 24, 2006 known as AllianceBernstein Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
Investment securities (excluding
U.S. government securities) $ 37,132,035 $ 54,649,774
U.S. government securities 5,764,808 10,684,824
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 486,296
Gross unrealized depreciation (703,372)
Net unrealized depreciation $ (217,076)
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
11
GLOBAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
Shares sold 106,825 428,291 $ 1,208,894 $ 5,453,556
Shares issued in
reinvestment of
dividends and
distributions 97,643 456,924 1,106,293 5,414,551
Shares redeemed (1,554,962) (807,173) (17,546,196) (9,844,716)
Net increase
(decrease) (1,350,494) 78,042 $ (15,231,009) $ 1,023,391
CLASS B
Shares sold 67,554 218,798 $ 766,302 $ 2,764,083
Shares issued in
reinvestment of
dividends and
distributions 25,144 120,606 282,362 1,417,119
Shares redeemed (123,549) (217,005) (1,397,480) (2,636,375)
Net increase
(decrease) (30,851) 122,399 $ (348,816) $ 1,544,827
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 6,174,320 $ 4,585,985
Net long-term capital gains 657,350 649,202
Total distributions paid $ 6,831,670 $ 5,235,187
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 1,241,991
Undistributed long term capital gains 130,525
Accumulated capital and other losses (3,058,866)(a)
Unrealized appreciation/(depreciation) 15,123(b)
Total accumulated earnings/(deficit) $ (1,671,227)
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$1,265,121, all of which expires in the year 2008. To the extent future capital
gains are offset by capital loss carryforwards, such gains will not be
distributed. Based on certain provisions in the Internal Revenue Code, various
limitations regarding the future utilization of these carryforwards, brought
forward as a result of the Fund's merger with Brinson Series Trust Strategic
Income Portfolio, may apply. During the current fiscal year, the Portfolio
utilized capital loss carryforwards of $126,701. Net capital losses and foreign
currency losses incurred after October 31, and within the taxable year are
deemed to arise on the first business day of the Portfolio's next taxable year.
For the year ended December 31, 2005, the Portfolio deferred until January 1,
2006, post-October capital losses of $99,968 and foreign currency losses of
$826,487. For the year ended December 31, 2005, the Portfolio deferred losses
on straddles of $867,290.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the realization for tax purposes of gains/losses on
certain derivative instruments.
13
GLOBAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act
14
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
of 1974, as amended ("ERISA"), certain state securities laws and common law.
All state court actions against the Adviser either were voluntarily dismissed
or removed to federal court. On February 20, 2004, the Judicial Panel on
Multidistrict Litigation transferred all actions to the United States District
Court for the District of Maryland (the "Mutual Fund MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of
15
GLOBAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
common law fiduciary duties. Plaintiffs seek an unspecified amount of
compensatory damages and punitive damages, rescission of their contracts with
the Adviser, including recovery of all fees paid to the Adviser pursuant to
such contracts, an accounting of all fund-related fees, commissions and soft
dollar payments, and restitution of all unlawfully or discriminatorily obtained
fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
16
GLOBAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ---------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $11.32 $13.63 $13.50 $12.63 $10.93 $10.96
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .14 .28 .25(c) .25 .25 .35
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions .10 (1.26) .93 1.40 1.58 (.38)
Net increase (decrease) in net asset
value from operations .24 (.98) 1.18 1.65 1.83 (.03)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.18) (1.18) (.78) (.78) (.13) -0-
Distributions from net realized gain
on investment and foreign currency
transactions (.10) (.15) (.27) -0- -0- -0-
Total dividends and distributions (.28) (1.33) (1.05) (.78) (.13) -0-
Net asset value, end of period $11.28 $11.32 $13.63 $13.50 $12.63 $10.93
TOTAL RETURN
Total investment return based on
net asset value (d) 2.16% (7.65)% 9.63% 13.26% 16.91% (.27)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $32,037 $47,443 $56,043 $58,658 $56,137 $48,221
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements .95%(e)(f) .87% .88% 1.15% 1.17% 1.07%
Expenses, before waivers
and reimbursements .95%(e)(f) .87% 1.02% 1.15% 1.17% 1.07%
Net investment income 2.44%(e)(f) 2.30% 1.93%(c) 1.93% 2.18% 3.28%
Portfolio turnover rate 85% 148% 107% 197% 220% 101%
See footnote summary on page 18
17
GLOBAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS (continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ---------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $11.21 $13.51 $13.40 $12.54 $10.86 $10.92
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .12 .25 .22(c) .21 .22 .32
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions .10 (1.25) .91 1.41 1.57 (.38)
Net increase (decrease) in net asset
value from operations .22 (1.00) 1.13 1.62 1.79 (.06)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.15) (1.15) (.75) (.76) (.11) -0-
Distributions from net realized gain
on investment and foreign currency
transactions (.10) (.15) (.27) -0- -0- -0-
Total dividends and distributions (.25) (1.30) (1.02) (.76) (.11) -0-
Net asset value, end of period $11.18 $11.21 $13.51 $13.40 $12.54 $10.86
TOTAL RETURN
Total investment return based on
net asset value (d) 2.00% (7.87)% 9.33% 13.08% 16.59% (.55)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period,
(000's omitted) $12,610 $12,986 $13,997 $11,399 $8,507 $7,150
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.21%(e)(f) 1.12% 1.13% 1.40% 1.42% 1.32%
Expenses, before waivers
and reimbursements 1.21%(e)(f) 1.12% 1.27% 1.40% 1.42% 1.32%
Net investment income 2.21%(e)(f) 2.05% 1.72%(c) 1.66% 1.92% 3.00%
Portfolio turnover rate 85% 148% 107% 197% 220% 101%
(a) As required, effective January 1, 2001, the Portfolio has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities. For the year ended
December 31, 2001, the effect of this change to Class A and Class B shares was
to decrease net investment income per share by $.04 and $.04, increase net
realized and unrealized gain (loss) on investments per share by $.04 and $.04,
and decrease the ratio of net investment income to average net assets from
3.67% to 3.28% and 3.39% to 3.00%, respectively.
(b) Based on average shares outstanding.
(c) Net of expenses waived or reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
18
GLOBAL BOND PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Global Bond Portfolio (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying
such services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Low Risk 45 bp on 1st $2.5 billion Global Bond
Income 40 bp on next $2.5 billion Portfolio
35 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Global Bond Portfolio $ 69,000 0.10%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
19
GLOBAL BOND PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Global Bond Portfolio Class A 1.02% December 31
Class B 1.27%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
EFFECTIVE
NET ASSETS ALLIANCE ALLIANCE
09/30/05 INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Global Bond Portfolio $63.8 Global Fixed 0.207%
Income Schedule
50 bp on 1st $20 m
35 bp on next $20 m
30 bp on next $20 m
25 bp on the balance
MINIMUM ACCOUNT SIZE $20 m
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund that invests in fixed income
securities:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Fixed Income 0.65%
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
20
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
FUND ACITM MUTUAL FUND(4) FEE
- -------------------------------------------------------------------------------
Global Bond Portfolio Alliance Global Bond Fund (Meiji) 0.54%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Global Bond Portfolio 0.450 0.766 1/9
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(8) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Global Bond Portfolio 0.881 0.978 5/13 0.978 3/9
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
(4) The name in parenthesis is the distributor of the fund.
(5) It should be noted that "effective management fee" is calculated by
Lipper using the Fund's contractual management fee rate at a hypothetical asset
level. The hypothetical asset level is based on the combined net assets of all
classes of the Fund, rounded up to the next $25 million. Lipper's total expense
ratio information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the
same criteria for selecting a Lipper Expense Group when selecting a Lipper
Expense Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe
allows for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
21
GLOBAL BOND PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent
and distribution related services to the Fund and receive transfer agent fees
and Rule 12b-1 payments. Additional information regarding distribution related
fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12b-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Global Bond Portfolio $32,164
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Global Bond Portfolio $31,552
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
22
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
costs from the behavior of fund expenses; there was a lack of consensus among
researchers as to whether economies of scale were being passed on to the
shareholders. It is contemplated that additional work will be performed to
determine if the benefits of economies of scale or scope are being passed to
shareholders by the Adviser. In the meantime, it is clear that to the extent
the Fund's assets exceed the initial breakpoint its shareholders benefit from a
lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(10) relative to its Lipper Performance Group(11) and
Lipper Performance Universe(12) for the period ended September 30, 2005.
GLOBAL BOND PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 9/9 13/13
3 year 9/9 11/13
5 year 8/9 9/13
10 year 4/6 8/10
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
1 3 5 10 SINCE
FUND YEAR YEAR YEAR YEAR INCEPTION
- -------------------------------------------------------------------------------
GLOBAL BOND PORTFOLIO 1.81 6.64 7.34 5.20 6.15
S&P/Citigroup World Govt.
Bond Index
(unhedged in USD) 3.02 8.04 8.23 5.50 7.44
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
23
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN GLOBAL DOLLAR GOVERNMENT PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
GLOBAL DOLLAR GOVERNMENT PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $ 993.33 $8.40 1.70%
Hypothetical (5% return before expenses) $1,000 $1,016.36 $8.50 1.70%
CLASS B
Actual $1,000 $ 992.26 $9.68 1.96%
Hypothetical (5% return before expenses) $1,000 $1,015.08 $9.79 1.96%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
SECURITY TYPE BREAKDOWN
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
SECURITY TYPE U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Sovereign Debt Obligations $ 21,642,412 79.5%
Corporate Debt Obligations 3,664,135 13.5
------------ -----
Total Investments* 25,306,547 93.0
Cash and receivables, net of liabilities 1,916,075 7.0
------------ -----
Net Assets $ 27,222,622 100.0%
* Excludes short-term investments.
2
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS-79.5%
ARGENTINA-4.8%
Republic of Argentina
3.97%, 12/31/33 $ 297 $ 264,518
4.889%, 8/03/12 (a) 1,023 945,053
Series V
7.00%, 3/28/11 95 88,155
------------
1,297,726
BRAZIL-13.7%
Federal Republic of Brazil
7.125%, 1/20/37 833 783,020
8.00%, 1/15/18 37 38,388
8.25%, 1/20/34 991 1,040,549
8.875%, 10/14/19-4/15/24 652 718,040
11.00%, 8/17/40 917 1,137,079
------------
3,717,076
BULGARIA-0.4%
Republic of Bulgaria
8.25%, 1/15/15 (b) 94 105,891
COLOMBIA-2.3%
Republic of Colombia
10.75%, 1/15/13 88 103,312
11.75%, 2/25/20 402 525,615
------------
628,927
COSTA RICA-0.4%
Republic of Costa Rica
8.05%, 1/31/13 (b) 47 49,350
8.11%, 2/01/12 (b) 57 59,993
------------
109,343
DOMINICAN REPUBLIC-0.2%
Dominican Republic
9.50%, 9/27/11 (b) 57 59,678
ECUADOR-2.2%
Republic of Ecuador
9.00%, 8/15/30 (b)(c) 605 583,528
EL SALVADOR-1.1%
Republic of El Salvador
7.625%, 9/21/34 (b) 72 74,520
7.65%, 6/15/35 (b) 107 103,790
8.50%, 7/25/11 (b) 100 108,250
------------
286,560
INDONESIA-1.6%
Republic of Indonesia
6.75%, 3/10/14 (b) 260 253,500
7.25%, 4/20/15 (b) 59 58,499
8.50%, 10/12/35 (b) 122 130,540
------------
442,539
JAMAICA-0.2%
Government of Jamaica
10.625%, 6/20/17 55 59,675
LEBANON-1.2%
Lebanese Republic
7.875%, 5/20/11 (b) 75 76,313
10.125%, 8/06/08 (b) 207 219,420
11.625%, 5/11/16 (b) 33 40,838
------------
336,571
MALAYSIA-1.1%
Malaysia
8.75%, 6/01/09 280 301,032
MEXICO-14.0%
United Mexican States
7.50%, 1/14/12 225 238,500
8.125%, 12/30/19 1,035 1,169,549
11.375%, 9/15/16 364 494,130
Series A
6.375%, 1/16/13 42 42,105
6.75%, 9/27/34 110 106,975
8.00%, 9/24/22 1,073 1,193,712
9.875%, 2/01/10 503 565,875
------------
3,810,846
NIGERIA-1.8%
Central Bank of Nigeria
Series WW
6.25%, 11/15/20 (c) 500 498,150
PANAMA-2.6%
Republic of Panama
6.70%, 1/26/36 305 270,383
7.125%, 1/29/26 173 166,945
7.25%, 3/15/15 18 18,180
8.875%, 9/30/27 39 43,836
9.375%, 7/23/12-4/01/29 53 60,720
9.625%, 2/08/11 134 148,070
------------
708,134
PERU-2.5%
Republic of Peru
8.375%, 5/03/16 174 186,180
8.75%, 11/21/33 443 486,193
9.875%, 2/06/15 4 4,680
------------
677,053
PHILIPPINES-6.1%
Republic of Philippines
7.75%, 1/14/31 162 160,380
8.25%, 1/15/14 296 307,100
8.375%, 2/15/11 11 11,385
8.875%, 3/17/15 246 263,589
9.00%, 2/15/13 300 314,250
9.50%, 2/02/30 107 122,515
9.875%, 1/15/19 125 144,063
10.625%, 3/16/25 280 345,800
------------
1,669,082
3
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
RUSSIA-12.3%
Russia Ministry of Finance
Series V
3.00%, 5/14/08 $ 1,755 $ 1,656,017
Series VII
3.00%, 5/14/11 160 137,200
Russian Federation
5.00%, 3/31/30 (b)(c) 1,140 1,213,301
11.00%, 7/24/18 (b) 240 330,600
------------
3,337,118
TURKEY-4.5%
Republic of Turkey
6.875%, 3/17/36 427 354,410
7.00%, 6/05/20 450 401,625
7.375%, 2/05/25 116 104,400
8.00%, 2/14/34 30 28,200
11.00%, 1/14/13 195 220,643
11.875%, 1/15/30 93 126,387
------------
1,235,665
UKRAINE-0.6%
Government of Ukraine
6.875%, 3/04/11 (b) 113 109,328
11.00%, 3/15/07 (b) 60 60,846
------------
170,174
URUGUAY-1.3%
Republic of Uruguay
5.875%, 1/15/33 (d) 136 122,715
7.50%, 3/15/15 29 27,768
9.25%, 5/17/17 200 214,300
------------
364,783
VENEZUELA-4.6%
Republic of Venezuela
5.75%, 2/26/16 88 78,320
6.09%, 4/20/11 (a)(b) 80 79,800
7.00%, 12/01/18 (b) 105 99,750
10.75%, 9/19/13 662 789,766
13.625%, 8/15/18 137 195,225
------------
1,242,861
Total Sovereign Debt Obligations
(cost $21,415,855) 21,642,412
CORPORATE DEBT OBLIGATIONS-13.5%
BRAZIL-0.4%
PF Export Receivables Master Trust
6.436%, 6/01/15 (b) 109 108,917
EL SALVADOR-0.3%
Aes El Salvador Trust
6.75%, 2/01/16 (b) 100 92,125
GERMANY-2.9%
Aries Vermogensverwltng
9.60%, 10/25/14 (b) 500 620,900
Citigroup (JSC Severstal)
9.25%, 4/19/14 (b) 68 70,543
Kyivstar
7.75%, 4/27/12 (b) 100 96,375
------------
787,818
HONG KONG-0.3%
Noble Group Ltd.
6.625%, 3/17/15 (b) 100 86,686
INDONESIA-0.6%
Freeport-McMoran Copper & Gold
10.125%, 2/01/10 150 159,188
JAMAICA-0.4%
Digicel Ltd.
9.25%, 9/01/12 (b) 100 104,500
KAZAKHSTAN-0.4%
Kazkommerts International BV
8.50%, 4/16/13 (b) 100 102,500
LUXEMBOURG-0.1%
Mobile Telesystems Finance
9.75%, 1/30/08 (b) 25 25,655
MEXICO-1.2%
America Movil, SA de CV
6.375%, 3/01/35 26 22,555
Monterrey Power, SA De C.V.
9.625%, 11/15/09 (b) 45 48,671
Pemex Project Funding Master Trust
8.00%, 11/15/11 250 264,375
------------
335,601
PEOPLES REPUBLIC OF CHINA-0.4%
Choada Modern Agriculture
7.75%, 2/08/10 (b) 112 110,320
PERU-0.4%
Southern Copper Corp.
6.375%, 7/27/15 100 95,602
ROMANIA-0.4%
MobiFon Holdings BV
12.50%, 7/31/10 100 113,250
RUSSIA-5.3%
Evraz Group, SA
8.25%, 11/10/15 (b) 100 97,250
Gazprom OAO
9.625%, 3/01/13 (b) 830 947,566
Gazstream, SA
5.625%, 7/22/13 (b) 141 136,754
Mobile Telesystems Finance
9.75%, 1/30/08 (b) 100 103,125
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Russian Standard Finance
7.50%, 10/07/10 (b) $ 100 $ 93,250
Tyumen Oil
11.00%, 11/06/07 (b) 55 57,778
------------
1,435,723
UKRAINE-0.4%
Kyivstar
10.375%, 8/17/09 (b) 100 106,250
Total Corporate Debt Obligations
(cost $3,684,276) 3,664,135
SHORT-TERM INVESTMENT-2.6%
TIME DEPOSIT-2.6%
The Bank of New York
4.25%, 7/03/06
(cost $720,000) 720 720,000
TOTAL INVESTMENTS-95.6%
(cost $25,820,131) 26,026,547
Other assets less liabilities-4.4% 1,196,075
NET ASSETS-100% $ 27,222,622
CREDIT DEFAULT SWAP CONTRACTS (SEE NOTE D)
NOTIONAL UNREALIZED
SWAP COUNTERPARTY & AMOUNT INTEREST TERMINATION APPRECIATION/
REFERENCED OBLIGATION (000) RATE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------------
BUY CONTRACTS:
Citigroup Global Markets, Inc.
Republic of Colombia
8.375%, 2/15/27 150 3.02% 1/20/10 $(10,390)
Citigroup Global Markets, Inc.
Republic of Hungary
4.50%, 2/06/13 75 0.50 11/26/13 756
JPMorgan Chase & Co.
Republic of Hungary
4.75%, 2/03/15 330 0.30 10/20/15 10,036
SALE CONTRACTS:
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 609 1.98 4/20/07 10,619
Citigroup Global Markets, Inc.
Federal Republic of Brazil
12.25%, 3/06/30 600 3.09 8/20/10 42,315
Citigroup Global Markets, Inc.
Republic of Colombia
8.375%, 2/15/27 250 1.13 1/20/07 2,473
Citigroup Global Markets, Inc.
Republic of Philippines
10.625%, 3/16/25 130 4.95 3/20/09 12,689
Credit Suisse First Boston
Federal Republic of Brazil
12.25%, 3/06/30 175 6.90 6/20/07 11,434
Credit Suisse First Boston
Federal Republic of Venezuela
9.25%, 9/15/27 520 3.17 10/20/15 25,431
Deutche Bank AG London
Federal Republic of Brazil
12.25%, 3/06/30 609 1.90 4/20/07 10,133
Morgan Stanley
Federal Republic of Brazil
12.25%, 3/06/30 160 3.80 8/20/06 3,011
5
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS (SEE NOTE D) (CONTINUED)
NOTIONAL UNREALIZED
SWAP COUNTERPARTY & AMOUNT INTEREST TERMINATION APPRECIATION/
REFERENCED OBLIGATION (000) RATE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------------
SALE CONTRACTS (CONTINUED):
JP Morgan Chase & Co.
OAO Gazprom
9.125%, 4/25/07 360 1.04% 10/20/10 $(1,856)
OAO Gazprom
10.5%, 10/21/09
OAO Gazprom
7.8%, 9/27/10
OAO Gazprom
9.625%, 3/01/13
OAO Gazprom
5.875%, 6/01/15
OAO Gazprom
8.625%, 4/28/14
Puttable on 4/28/14
(a) Floating rate security. Stated interest rate was in effect at June 30,
2006.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $6,826,900 or 25.1% of net assets.
(c) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at June 30, 2006.
(d) PIK (Paid-In-Kind) Payments.
See Notes to Financial Statements.
6
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $25,820,131) $ 26,026,547
Unrealized appreciation of swap contracts 128,897
Receivable for investment securities sold 641,410
Interest receivable 577,949
Receivable for capital stock sold 9,466
Total assets 27,384,269
LIABILITIES
Due to custodian 31,272
Unrealized depreciation of swap contracts 12,246
Custodian fee payable 40,688
Audit fee payable 22,053
Administrative fee payable 19,607
Advisory fee payable 12,104
Payable for capital stock redeemed 2,920
Distribution fee payable 1,178
Transfer agent fee payable 123
Accrued expenses 19,456
Total liabilities 161,647
NET ASSETS $ 27,222,622
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,122
Additional paid-in capital 25,367,789
Undistributed net investment income 765,551
Accumulated net realized gain on investment transactions 764,093
Net unrealized appreciation of investments 323,067
$ 27,222,622
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $21,865,671 1,703,434 $12.84
B $ 5,356,951 418,573 $12.80
See Notes to Financial Statements.
7
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 1,019,852
EXPENSES
Advisory fee 71,595
Distribution fee--Class B 6,909
Transfer agency--Class A 635
Transfer agency--Class B 153
Custodian 104,236
Administrative 39,000
Audit 20,248
Printing 7,633
Legal 757
Directors' fees 638
Miscellaneous 1,016
Total expenses before interest expense 252,820
Interest expense 181
Total expenses 253,001
Net investment income 766,851
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 894,676
Swap contracts (89,853)
Net change in unrealized appreciation/depreciation of:
Investments (1,891,426)
Swap contracts 118,984
Net loss on investment transactions (967,619)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (200,768)
See Notes to Financial Statements.
8
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEAR ENDED
2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 766,851 $ 1,601,867
Net realized gain on investment
transactions 804,823 1,358,958
Net change in unrealized
appreciation/depreciation
of investments (1,772,442) (466,055)
Net increase (decrease) in net
assets from operations (200,768) 2,494,770
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (1,319,149) (1,361,063)
Class B (305,782) (330,495)
Net realized gain on investment
transactions
Class A (1,040,768) (1,031,497)
Class B (251,506) (258,602)
CAPITAL STOCK TRANSACTIONS
Net increase 1,885,594 1,030,988
Total increase (decrease) (1,232,379) 544,101
NET ASSETS
Beginning of period 28,455,001 27,910,900
End of period (including
undistributed net investment
income of $765,551 and
$1,623,631, respectively) $ 27,222,622 $ 28,455,001
See Notes to Financial Statements.
9
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Global Dollar Government Portfolio (the "Portfolio") is a
series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund").
The Portfolio's investment objective is to seek a high level of current income
and, secondarily, capital appreciation. The Portfolio is non-diversified as
defined under the Investment Company Act of 1940. The Fund was incorporated in
the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investments 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 investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the Portfolio's policy to meet the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the trade date securities
are purchased or sold. Investment gains and losses are determined on the
identified cost basis. The Portfolio amortizes premiums and accretes discounts
as adjustments to interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
7. REPURCHASE AGREEMENTS
It is the policy of the Portfolio that its custodian or designated subcustodian
take control of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of collateral by the
Portfolio may be delayed or limited.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .50% 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
11
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
daily net assets. Prior to September 7, 2004, the Portfolio paid the Adviser an
advisory fee at an annual rate of .75% of the Portfolio's average daily net
assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 7,733,809 $ 8,982,498
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding swap contracts)
are as follows:
Gross unrealized appreciation $ 739,288
Gross unrealized depreciation (532,872)
Net unrealized appreciation $ 206,416
1. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not per-
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
form under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from written options which
expire unexercised are recorded by the Portfolio on the expiration date as
realized gains from options written. The difference between the premium
received and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or if the
premium received is less than the amount paid for the closing purchase
transaction, as a realized loss. If a call option is exercised, the premium
received is added to the proceeds from the sale of the underlying security or
currency in determining whether the Portfolio has realized a gain or loss. If a
put option is exercised, the premium received reduces the cost basis of the
security or currency purchased by the Portfolio. In writing an option, the
Portfolio bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option. Exercise of an option
written by the Portfolio could result in the Portfolio's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
2. SWAP AGREEMENTS
The Portfolio may enter into swaps on sovereign debt obligations to protect
itself from interest rate fluctuations on the underlying debt instruments and
for investment purposes. 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.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. 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 contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the underlying value of the securities.
The Portfolio accrues for the interim payments on swap contracts on a daily
basis, with the net amount recorded within unrealized appreciation/depreciation
of swap contracts on the statement of assets and liabilities. Once the interim
payments are settled in cash, the net amount is recorded as realized gain/loss
on swaps, in addition to realized gain/loss recorded upon the termination of
swap contracts on the statements of operations. Fluctuations in the value of
swap contracts are recorded as a component of net change in unrealized
appreciation/depreciation of investments.
The Portfolio may enter into credit default swaps. The Portfolio may purchase
credit protection on the referenced obligation of the credit default swap ("Buy
Contract") or provide credit protection on the referenced obligation of the
credit default swap ("Sale Contract"). A sale/(buy) in a credit default swap
provides upon the occurrence of a credit event, as defined in the swap
agreement, for the Portfolio to buy/(sell) from/(to) the counterparty at the
notional amount (the "Notional Amount") and receive/(deliver) the principal
amount of the referenced obligation. If a credit event occurs, the maximum
payout amount for a Sale Contract is limited to the Notional Amount of the swap
contract ("Maximum Payout Amount"). During the term of the swap agreement, the
Portfolio receives/(pays) interim fixed payments from/(to) the respective
counterparty, calculated at the agreed upon interest rate applied to the
Notional Amount. These interim payments are recorded within unrealized
appreciation/depreciation of swap contracts on the statement of assets and
liabilities.
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 and no credit event occurs, it will lose its investment.
In addition, if the Portfolio is a seller 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 loss to the Portfolio.
13
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
At June 30, 2006, the Portfolio had Sale Contracts outstanding with Maximum
Payout Amounts aggregating $3,413,000, with net unrealized appreciation of
$116,249 and terms ranging from 2 months to 9 years, as reflected in the
portfolio of investments.
In certain circumstances, the Portfolio may hold Sale Contracts on the same
referenced obligation and with the same counterparty it has purchased credit
protection, which may reduce its obligation to make payments on Sale Contracts,
if a credit event occurs. The Portfolio had Buy Contracts outstanding with a
Notional Amount of $150,000 with respect to the same referenced obligations and
same counterparties of certain Sale Contracts outstanding, which reduced its
obligation to make payments on Sale Contracts to $3,263,000 as of June 30, 2006.
3. REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Portfolio sells securities and agrees
to repurchase them at a mutually agreed upon date and price. At the time the
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account with the custodian containing liquid assets having a value
at least equal to the repurchase price.
For the six months ended June 30, 2006, the average amount of reverse
repurchase agreements outstanding was $34,466 and the daily weighted average
interest rate was 1.50%.
NOTE E: CAPITAL STOCK
Each class consist of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 261,975 351,062 $ 3,790,809 $ 4,999,771
Shares issued
in reinvestment
of dividends and
distributions 182,798 177,358 2,359,917 2,392,560
Shares redeemed (341,940) (478,486) (4,840,789) (6,879,459)
Net increase 102,833 49,934 $ 1,309,937 $ 512,872
CLASS B
Shares sold 27,221 106,971 $ 394,057 $ 1,536,498
Shares issued
in reinvestment
of dividends and
distributions 43,267 43,799 557,288 589,098
Shares redeemed (26,706) (113,663) (375,688) (1,607,480)
Net increase 43,782 37,107 $ 575,657 $ 518,116
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
not had prior claims or losses pursuant to these indemnification provisions and
expects the risk of loss thereunder to be remote.
Leverage Risk--The Portfolio may use significant borrowings for leverage or may
otherwise leverage its assets through, for example, the use of reverse
repurchase agreements or dollar rolls. When the Portfolio borrows money or
otherwise leverage its portfolio, it may be volatile because leverage tends to
exaggerate the effect of any increase or decrease in the value of the
Portfolio's investments. Reverse repurchase agreements and dollar rolls also
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 1,800,375 $ 1,944,913
Net long-term capital gains 1,181,282 -0-
Total taxable distributions 2,981,657 1,944,913
Total distributions paid $ 2,981,657 $ 1,944,913
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 1,856,729
Undistributed long-term capital gains 1,053,443
Unrealized appreciation/(depreciation) 2,060,512(a)
Total accumulated earnings/(deficit) $ 4,970,684
(a) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the difference between the book and tax treatment of
swap income.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund
15
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
investors based on (i) their aliquot share of losses suffered by the fund due
to market timing, and (ii) a proportionate share of advisory fees paid by such
fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
17
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
18
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ------------------------------------------------------------------
(UNAUDITED) 2005 2004(a) 2003 2002 2001(b)
--------------- ------------ ------------ ------------ --------- -------------
Net asset value,
beginning of period $14.42 $14.79 $14.53 $11.43 $10.63 $10.76
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (c) .39 .84 .86(d) .95 .94(d) 1.11(d)
Net realized and unrealized
gain (loss) on investment
transactions (.48) .46 .45 2.83 .70 (.10)
Net increase (decrease) in net
asset value from operations (.09) 1.30 1.31 3.78 1.64 1.01
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.83) (.95) (1.05) (.68) (.84) (1.14)
Distributions from net realized
gain on investment
transactions (.66) (.72) -0- -0- -0- -0-
Total dividends and
Distributions (1.49) (1.67) (1.05) (.68) (.84) (1.14)
Net asset value, end of period $12.84 $14.42 $14.79 $14.53 $11.43 $10.63
TOTAL RETURN
Total investment return based
on net asset value (e) (.67)% 9.62% 10.12% 33.41% 16.14% 9.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $21,866 $23,073 $22,932 $26,433 $22,198 $11,249
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.70%(f)(g) 1.69% 1.76% 1.90% 1.40% .95%
Expenses, before waivers and
reimbursements 1.70%(f)(g) 1.69% 1.93% 1.90% 2.00% 2.37%
Expenses, before waivers and
reimbursements excluding
interest expense 1.70%(f)(g) 1.68% 1.92% 1.88% 2.00% 2.37%
Net investment income 5.42%(f)(g) 5.83% 6.07%(d) 7.20% 8.83%(d) 10.63%(d)
Portfolio turnover rate 29% 91% 188% 150% 142% 176%
See footnote summary on page 20.
19
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
FINANCIAL HIGHLIGHTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------
SIX MONTHS JULY 22,
ENDED YEAR ENDED DECEMBER 31, 2002(h) TO
JUNE 30, 2006 ---------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004(a) 2003 2002
--------------- ------------ ------------ ------------ -------------
Net asset value,
beginning of period $14.36 $14.74 $14.51 $11.42 $10.20
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (c) .37 .80 .82(d) .88 .35(d)
Net realized and unrealized
gain (loss) on investment
transactions(.47) .46 .45 2.89 .87
Net increase (decrease) in net
asset value from operations (.10) 1.26 1.27 3.77 1.22
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net investment
Income (.80) (.92) (1.04) (.68) -0-
Distributions from net realized
gain on investment
transactions (.66) (.72) -0- -0- -0-
Total dividends and
Distributions (1.46) (1.64) (1.04) (.68) -0-
Net asset value, end of period $12.80 $14.36 $14.74 $14.51 $11.42
TOTAL RETURN
Total investment return based
on net asset value (e) (.77)% 9.35% 9.81% 33.34% 11.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $5,357 $5,382 $4,979 $3,162 $226
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.96%(f)(g) 1.93% 2.07% 2.14% 1.63%(g)
Expenses, before waivers and
reimbursements 1.96%(f)(g) 1.93% 2.24% 2.14% 1.99%(g)
Expenses, before waivers and
reimbursements excluding
interest expense 1.96%(f)(g) 1.93% 2.23% 2.12% 1.99%(g)
Net investment income 5.17%(f)(g) 5.60% 5.74%(d) 6.67% 9.12%(d)(g)
Portfolio turnover rate 29% 91% 188% 150% 142%
(a) As of January 1, 2004, the Portfolio has adopted the method of accounting
for interim payments on swap contracts in accordance with Financial Accounting
Standards Board Statement No. 133. These interim payments are reflected within
net realized and unrealized gain (loss) on swap contracts, however, prior to
January 1, 2004, these interim payments were reflected within interest
income/expense on the statement of operations. The effect of this change for
the year ended December 31, 2004, was to decrease net investment income per
share by $.02 and increase net realized and unrealized gain (loss) on
investment transactions per share by $.02 for Class A and B. Consequently, the
ratios of net investment income to average net assets were decreased by 0.17%
for Class A and B respectively.
(b) As required, effective January 1, 2001, the Portfolio has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities. For the year ended
December 31, 2001, the effect of this change to Class A was to decrease net
investment income by less than $.01 per share, decrease net realized and
unrealized loss on investments by less than $.01 per share, and decrease the
ratio of net investment income to average net assets from 10.65% to 10.63%.
(c) Based on average shares outstanding.
(d) Net of expenses waived or reimbursed by the Adviser.
(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 the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(g) Annualized.
(h) Commencement of distribution.
20
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Global Dollar Government Portfolio (the "Fund"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplate eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
High Income 50 bp on 1st $2.5 billion Global Dollar Government
45 bp on next $2.5 billion Portfolio
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Global Dollar Government Portfolio $69,000 0.25%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
21
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Global Dollar Government Portfolio Class A 1.92% December 31
Class B 2.23%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Global Dollar $28.9 Emerging Market 0.604%
Government Debt Schedule
Portfolio 65 bp on 1st $20 m
50 bp on next $20 m
40 bp on next $20 m
35 bp on the balance
Minimum account size $20 m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has almost the same advisory fee schedule as
the Fund.(3)
(3) The AllianceBernstein Emerging Market Debt Fund, Inc., whose investment
style is similar to the Fund, has an advisory fee schedule with the same
breakpoints as the Fund, although the fund's advisory fees are based on the
fund's adjusted total assets, which is the average daily value of the total
assets of the fund, minus the sum of accrued liabilities of the fund, other
than the principal amount of money borrowed.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund that invests in fixed income
securities:
ASSET CLASS FEE(4)
- -------------------------------------------------------------------------------
Fixed Income 0.65%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Global Dollar Government Portfolio 0.750 0.766 3/9
The directors noted that the Fund's approximate current size contractual
effective fee rate of 0.75% was slightly lower than the Lipper group median
(Lipper reported the Fund's fee prior to 2004; the current fee is 0.50%).
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(8) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Global Dollar
Government Portfolio 1.760 0.978 14/14 0.978 9/9
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces
(4) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
23
GLOBAL DOLLAR GOVERNMENT PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
profitability information at the Fund level which reflects the Adviser's
management reporting approach. See discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund increased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent
and distribution related services to the Fund and receive transfer agent fees
and Rule 12b-1 payments. Additional information regarding distribution related
fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Global Dollar Government Portfolio $10,677
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Global Dollar Government Portfolio $91,143
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(10) relative to its Lipper Performance Group(11) and
Lipper Performance Universe(12) for the period ended September 30, 2005.
GLOBAL DOLLAR GOVERNMENT PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 2/9 2/13
3 year 1/9 1/13
5 year 1/9 1/13
10 year 1/6 1/10
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
GLOBAL DOLLAR
GOVERNMENT PORTFOLIO 13.45 22.44 15.48 13.13 12.56
J.P. Morgan
EMBI Plus Index 15.15 21.81 12.70 14.37 13.84
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
25
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN HIGH YIELD PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
HIGH YIELD PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
HIGH YIELD PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- -------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,012.41 $5.74 1.15%
Hypothetical (5% return before expenses) $1,000 $1,019.09 $5.76 1.15%
CLASS B
Actual $1,000 $1,010.98 $6.98 1.40%
Hypothetical (5% return before expenses) $1,000 $1,017.85 $7.00 1.40%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
HIGH YIELD PORTFOLIO
SECURITY TYPE BREAKDOWN
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
SECURITY TYPE U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Corporate Debt Obligations $ 41,721,357 98.0%
Preferred Stocks 291,750 0.7
Warrant 1 0.0
------------ -----
Total Investments* 42,013,108 98.7
Cash and receivables, net of liabilities 578,042 1.3
------------ -----
Net Assets $ 42,591,150 100.0%
* Excludes short-term investments.
2
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-98.0%
AEROSPACE/DEFENSE-0.6%
L-3 Communications Corp.
5.875%, 1/15/15 (a) $ 195 $ 181,838
Sequa Corp.
9.00%, 8/01/09 (a) 70 73,850
------------
255,688
AUTOMOTIVE-6.1%
Affinia Group, Inc.
9.00%, 11/30/14 (a) 85 77,138
Asbury Automotive Group
8.00%, 3/15/14 (a) 109 105,730
Autonation, Inc.
7.00%, 4/15/14 (a)(b) 240 236,399
7.045%, 4/15/13 (a)(b)(c) 30 29,850
Avis Budget Car Rental LLC
7.75%, 5/15/16 (a)(b) 160 154,000
Ford Motor Co.
7.45%, 7/16/31 (a) 304 219,640
Ford Motor Credit Co.
4.95%, 1/15/08 (a) 165 155,324
7.00%, 10/01/13 (a) 129 111,022
General Motors Acceptance Corp.
6.875%, 9/15/11 (a) 231 220,411
8.00%, 11/01/31 (a) 135 129,755
General Motors Corp.
8.375%, 7/15/33 (a) 290 233,450
HLI Operating Co., Inc.
10.50%, 6/15/10 (a) 100 83,500
Keystone Automotive Operations, Inc.
9.75%, 11/01/13 (a) 158 149,310
Lear Corp.
Series B
8.11%, 5/15/09 (a) 100 97,500
Tenneco, Inc.
8.625%, 11/15/14 (a) 65 64,838
TRW Automotive
9.375%, 2/15/13 (a) 93 98,813
11.00%, 2/15/13 (a) 67 73,198
United Auto Group, Inc.
9.625%, 3/15/12 (a) 115 120,175
Visteon Corp.
7.00%, 3/10/14 (a) 315 257,118
------------
2,617,171
BROADCASTING/MEDIA-0.9%
Allbritton Communications Co.
7.75%, 12/15/12 (a) 165 163,350
Sirius Satellite Radio, Inc.
9.625%, 8/01/13 (a) 95 89,063
XM Satellite Radio, Inc.
9.75%, 5/01/14 (a)(b) 120 109,800
------------
362,213
BUILDING/REAL ESTATE-2.3%
Associated Materials, Inc.
11.25%, 3/01/14 (a)(d) 265 159,663
D.R. Horton, Inc.
6.875%, 5/01/13 (a) 190 189,549
KB Home
7.75%, 2/01/10 (a) 150 150,000
M/I Homes, Inc.
6.875%, 4/01/12 (a) 90 77,850
Schuler Homes, Inc.
10.50%, 7/15/11 (a) 155 163,138
Williams Lyon Homes, Inc.
10.75%, 4/01/13 (a) 230 220,799
------------
960,999
CABLE-5.5%
Cablevision Systems Corp.
Series B
8.00%, 4/15/12 (a) 220 216,975
CCH I Holdings LLC
11.75%, 5/15/14 (a) 900 566,999
CSC Holdings, Inc.
7.25%, 4/15/12 (a)(b) 190 183,350
7.625%, 7/15/18 (a) 107 105,930
DirecTV Holdings LLC
6.375%, 6/15/15 (a) 226 208,485
EchoStar DBS Corp.
6.375%, 10/01/11 (a) 114 109,155
Insight Communications Co., Inc.
12.25%, 2/15/11 (a) 231 244,282
Insight Midwest LP/Insight Capital, Inc.
9.75%, 10/01/09 (a) 150 153,000
Intelsat Subsidiary Holding Co., Ltd. (Bermuda)
8.625%, 1/15/15 (a) 135 135,338
9.614%, 1/15/12 (a)(c) 65 65,650
PanAmSat Corp.
9.00%, 8/15/14 (a) 168 170,520
Rogers Cable, Inc. (Canada)
6.75%, 3/15/15 (a) 205 195,263
------------
2,354,947
CHEMICALS-3.2%
Basell AFSCA (Luxembourg)
8.375%, 8/15/15 (a)(b) 185 177,831
Equistar Chemical Funding LP
10.125%, 9/01/08 (a) 185 194,712
10.625%, 5/01/11 (a) 130 139,588
Huntsman ICI Chemicals LLC
10.125%, 7/01/09 (a) 124 125,860
Huntsman LLC
11.50%, 7/15/12 (a) 143 159,803
Ineos Group Holdings Plc (United Kingdom)
8.50%, 2/15/16 (a)(b) 179 167,589
3
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Quality Distribution LLC
9.00%, 11/15/10 (a) $ 245 $ 225,093
Rhodia, SA (France)
8.875%, 6/01/11 (a) 187 186,299
------------
1,376,775
COMMUNICATIONS-FIXED-5.1%
Citizens Communications Co.
6.25%, 1/15/13 (a) 270 255,150
Eircom Funding (Ireland)
8.25%, 8/15/13 (a) 205 217,300
Intelsat Bermuda Ltd. (Bermuda)
11.25%, 6/15/16 (a)(b) 344 352,600
Level 3 Communications, Inc.
11.50%, 3/01/10 (a)(b) 65 64,350
Qwest Capital Funding, Inc.
7.25%, 2/15/11 (a) 445 432,763
Qwest Corp.
6.875%, 9/15/33 (a) 265 229,225
8.875%, 3/15/12 (a) 165 174,075
Time Warner Telecom Holdings, Inc.
9.25%, 2/15/14 (a) 105 107,625
Verizon New York Inc.
Series B
7.375%, 4/01/32 (a) 343 338,123
------------
2,171,211
COMMUNICATIONS-MOBILE-6.5%
American Tower
7.125%, 10/15/12 (a) 311 310,222
Digicel Ltd. (Bermuda)
9.25%, 9/01/12 (a)(b) 261 272,745
Dobson Cellular Systems, Inc.
8.375%, 11/01/11 (a)(b) 116 119,190
Dobson Communications Corp.
8.875%, 10/01/13 (a) 90 88,425
Inmarsat Finance Plc (United Kingdom)
7.625%, 6/30/12 (a) 145 148,625
10.375%, 11/15/12 (a)(d) 205 174,506
KYIVSTAR (Ukraine)
10.375%, 8/17/09 (a)(b) 290 308,124
MobiFon Holdings BV (Netherlands)
12.50%, 7/31/10 (a) 505 571,912
Mobile Telesystems Finance, SA (Luxembourg)
8.00%, 1/28/12 (a)(b) 286 279,208
Rogers Wireless, Inc. (Canada)
7.25%, 12/15/12 (a) 155 156,163
7.50%, 3/15/15 (a) 210 212,100
Rural Cellular Corp.
9.75%, 1/15/10 (a) 135 134,494
------------
2,775,714
CONSUMER MANUFACTURING-1.7%
ACCO Brands Corp.
7.625%, 8/15/15 (a) 235 217,963
Broder Brothers Co.
11.25%, 10/15/10 (a) 147 136,710
Covalence Specialty Materials Corp.
10.25%, 3/01/16 (a)(b) 65 62,400
Jostens IH Corp.
7.625%, 10/01/12 (a) 105 101,850
Levi Strauss & Co.
8.875%, 4/01/16 (a)(b) 113 107,915
9.74%, 4/01/12 (a)(c) 20 20,350
Quicksilver Resources
7.125%, 4/01/16 (a) 90 84,375
------------
731,563
CONTAINERS-0.3%
Ball Corp.
6.625%, 3/15/18 (a) 125 116,563
DERIVATIVES-4.9%
Racers
5.04%, 5/01/07 (a)(b)(c) 2,100 2,063,546
DIVERSFIED MEDIA-3.3%
American Media Operation
8.875%, 1/15/11 (a) 140 123,900
10.25%, 5/01/09 (a) 47 43,945
Dex Media, Inc.
8.00%, 11/15/13 (a) 125 125,625
Dex Media East LLC
9.875%, 11/15/09 (a) 50 52,875
12.125%, 11/15/12 (a) 91 102,148
Dex Media West LLC
Series B
8.50%, 8/15/10 (a) 60 62,250
Lamar Media Corp.
6.625%, 8/15/15 (a) 55 50,875
Liberty Media Corp.
5.70%, 5/15/13 (a) 75 68,110
7.875%, 7/15/09 (a) 58 60,046
8.25%, 2/01/30 (a) 75 71,785
Rainbow National Services LLC
8.75%, 9/01/12 (a)(b) 105 110,250
10.375%, 9/01/14 (a)(b) 100 110,750
WDAC Subsidiary
8.375%, 12/01/14 (a)(b) 145 142,463
WMG Holding Corp.
9.50%, 12/15/14 (a)(d) 378 272,159
------------
1,397,181
ENERGY-5.5%
Chesapeake Energy Corp.
6.50%, 8/15/17 (a) 145 132,313
7.50%, 9/15/13 (a) 200 200,500
7.75%, 1/15/15 (a) 260 260,649
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
El Paso Corp.
7.75%, 1/15/32 (a) $ 361 $ 351,523
Enterprise Products Operating LP
Series B
5.60%, 10/15/14 (a) 110 104,132
Grant Prideco, Inc.
Series B
6.125%, 8/15/15 (a) 105 97,913
HilCorp Energy
10.50%, 9/01/10 (a)(b) 135 145,463
Kerr-McGee Corp.
6.875%, 9/15/11 (a) 85 87,846
Kinder Morgan Finance Co.
5.35%, 1/05/11 (a) 95 87,527
Newfield Exploration Co.
6.625%, 4/15/16 (a) 130 122,525
NRG Energy, Inc.
7.25%, 2/01/14 (a) 45 43,875
7.375%, 2/01/16 (a) 230 224,249
PetroHawk Energy Corp.
9.125%, 7/15/13 (b) 107 106,465
Pride International, Inc.
7.375%, 7/15/14 (a) 210 211,050
Tesoro Corp.
6.25%, 11/01/12 (a)(b) 170 161,500
------------
2,337,530
FINANCIAL-2.1%
Crum & Forster Holdings Corp.
10.375%, 6/15/13 (a) 105 106,838
E*Trade Financial Corp.
7.375%, 9/15/13 (a) 95 95,000
7.875%, 12/01/15 (a) 324 333,719
8.00%, 6/15/11 (a) 90 91,800
Hexion US Finance Corp.
9.00%, 7/15/14 (a) 145 146,813
Liberty Mutual Group
5.75%, 3/15/14 (a)(b) 140 131,498
------------
905,668
FOOD/BEVERAGE-2.8%
Altria Group, Inc.
7.75%, 1/15/27 (a) 75 84,156
Central European Distribution Corp.
8.00%, 7/25/12 (a)(b) 59 81,033
Dean Foods Co.
7.00%, 6/01/16 (a) 180 174,150
Del Monte Corp.
8.625%, 12/15/12 (a) 70 72,100
Dole Food Co., Inc.
8.625%, 5/01/09 (a) 60 57,300
8.875%, 3/15/11 (a) 38 35,625
Domino's, Inc.
8.25%, 7/01/11 (a) 127 131,763
Foodcorp Ltd. (South Africa)
8.875%, 6/15/12 (a)(b) 95 126,978
Reynolds American, Inc.
7.25%, 6/01/12-6/01/13(a)(b) 415 406,312
------------
1,169,417
GAMING-5.4%
Greektown Holdings LLC
10.75%, 12/01/13 (a)(b) 90 94,950
Kerzner International Ltd. (Bahamas)
6.75%, 10/01/15 (a) 215 224,406
MGM Mirage, Inc.
6.625%, 7/15/15 (a) 237 221,003
8.375%, 2/01/11 (a) 280 286,999
Mohegan Tribal Gaming Authority
7.125%, 8/15/14 (a) 155 149,963
Park Place Entertainment Corp.
7.875%, 3/15/10 (a) 90 93,375
9.375%, 2/15/07 (a) 120 122,100
Penn National Gaming, Inc.
6.875%, 12/01/11 (a) 175 171,063
Riviera Holdings Corp.
11.00%, 6/15/10 (a) 210 222,075
Seneca Gaming Corp.
7.25%, 5/01/12 (a) 155 150,156
Station Casinos, Inc.
6.625%, 3/15/18 (a) 115 104,075
Turning Stone Casino Resort Enterprises
9.125%, 12/15/10 (a)(b) 140 141,400
Wynn Las Vegas LLC
6.625%, 12/01/14 (a) 345 325,162
------------
2,306,727
HEALTH CARE-5.7%
Concentra Operating Corp.
9.125%, 6/01/12 (a) 50 51,750
9.50%, 8/15/10 (a) 95 98,325
Coventry Health Care, Inc.
5.875%, 1/15/12 (a) 90 86,400
6.125%, 1/15/15 (a) 105 99,825
Davita, Inc.
7.25%, 3/15/15 (a) 175 168,000
Hanger Orthopedic Group, Inc.
10.25%, 6/01/14 (a)(b) 90 89,100
HCA, Inc.
6.375%, 1/15/15 (a) 450 416,947
6.75%, 7/15/13 (a) 180 171,887
Healthsouth Corp.
10.75%, 6/15/16 (a)(b) 125 122,500
Iasis Healthcare Corp.
8.75%, 6/15/14 (a) 200 196,000
Omnicare, Inc.
6.875%, 12/15/15 (a) 270 256,500
Select Medical Corp.
7.625%, 2/01/15 (a) 142 123,540
Triad Hospitals, Inc.
7.00%, 11/15/13 (a) 200 194,500
5
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Universal Hospital Services, Inc.
10.125%, 11/01/11 (a) $ 155 $ 161,200
Vanguard Health Holdings Co.
11.25%, 10/01/15 (a)(d) 255 179,775
------------
2,416,249
INDUSTRIAL-3.1%
Amsted Industries, Inc.
10.25%, 10/15/11 (a)(b) 130 139,100
Case New Holland, Inc.
9.25%, 8/01/11 (a) 175 184,188
FastenTech, Inc.
11.50%, 5/01/11 (a) 85 86,700
Goodman Global Holdings
7.875%, 12/15/12 (a) 135 128,925
Invensys Plc (United Kingdom)
9.875%, 3/15/11 (a)(b) 170 184,450
Mueller Group, Inc.
10.00%, 5/01/12 (a) 150 161,250
Sensus Metering Systems, Inc.
8.625%, 12/15/13 (a) 125 121,875
Terex Corp.
Series B
10.375%, 4/01/11 (a) 96 101,520
Trinity Industries
6.50%, 3/15/14 (a) 230 224,250
------------
1,332,258
LODGING/LEISURE-4.6%
Gaylord Entertainment Co.
8.00%, 11/15/13 (a) 136 135,830
Host Marriott LP
6.75%, 6/01/16 (a)(b) 115 109,681
Series G
9.25%, 10/01/07 (a) 160 165,000
Series I
9.50%, 1/15/07 (a) 125 128,125
NCL Corp. (Bermuda)
10.625%, 7/15/14 (a) 125 122,813
Quebecor Media, Inc. (Canada)
7.75%, 3/15/16 (a)(b) 260 254,800
Royal Caribbean Cruises, Ltd. (Liberia)
8.75%, 2/02/11 (a) 140 150,506
Six Flags, Inc.
9.625%, 6/01/14 (a) 270 245,700
Starwood Hotels Resorts
7.875%, 5/01/12 (a) 175 182,656
Universal City Development
11.75%, 4/01/10 (a) 170 185,088
Universal City Florida Holding Co.
8.375%, 5/01/10 (a) 60 60,300
Vail Resorts, Inc.
6.75%, 2/15/14 (a) 210 199,500
------------
1,939,999
MINING & METALS-3.6%
AK Steel Corp.
7.875%, 2/15/09 (a) 190 189,050
Citigroup (JSC Severstal) (Germany)
9.25%, 4/19/14 (a) 234 242,752
Evraz Group, SA (Luxembourg)
8.25%, 11/10/15 (a)(b) 223 216,868
Freeport-McMoRan Copper & Gold, Inc. Cl. B
10.12%, 2/01/10 (a) 120 127,350
International Steel Group
6.50%, 4/15/14 (a) 134 126,630
Ispat Inland ULC (Canada)
9.75%, 4/01/14 (a) 172 189,630
Massey Energy Co.
6.875%, 12/15/13 140 130,200
Peabody Energy Corp.
6.875%, 3/15/13 (a) 330 324,224
------------
1,546,704
PAPER/PACKAGING-1.7%
Berry Plastics Corp.
10.75%, 7/15/12 (a) 150 162,375
Crown Americas LLC
7.625%, 11/15/13 (a)(b) 185 181,763
Newpage Corp.
10.00%, 5/01/12 (a) 125 129,375
Owens-Brockway Glass Container
8.875%, 2/15/09 200 205,999
Russell-Stanley Holdings, Inc.
9.00%, 11/30/08(a)(e)(f)(g) 91 24,074
------------
703,586
PUBLISHING-0.9%
RH Donnelley Corp.
6.875%, 1/15/13 (a)(b) 193 177,560
8.875%, 1/15/16 (a)(b) 190 191,663
------------
369,223
RETAIL-1.1%
Burlington Coat Factory
Warehouse Corp.
11.125%, 4/15/14 (a)(b) 65 63,050
GSC Holdings Corp.
8.00%, 10/01/12 (a) 280 280,000
JC Penney Co., Inc.
7.625%, 3/01/97 (a) 120 119,123
------------
462,173
SERVICE-3.9%
Allied Waste North America, Inc.
6.375%, 4/15/11 (a) 174 167,040
7.125%, 5/15/16 (a)(b) 275 259,187
Series B
7.375%, 4/15/14 (a) 90 85,500
6
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
H & E Equipment Services, Inc.
11.125%, 6/15/12 (a) $ 137 $ 151,288
Iron Mountain, Inc.
6.625%, 1/01/16 (a) 170 153,000
Service Corp. International
6.50%, 3/15/08 (a) 163 161,778
7.70%, 4/15/09 (a) 160 160,800
United Rentals North America, Inc.
6.50%, 2/15/12 (a) 247 233,415
7.00%, 2/15/14 (a) 40 36,550
7.75%, 11/15/13 (a) 270 256,500
------------
1,665,058
SUPERMARKET/DRUG-1.0%
Couche-Tard US/Finance Corp.
7.50%, 12/15/13 (a) 169 168,155
Jean Coutu Group, Inc. (Canada)
8.50%, 8/01/14 (a) 230 211,600
Stater Brothers Holdings, Inc.
8.125%, 6/15/12 (a) 65 64,188
------------
443,943
TECHNOLOGY-2.7%
Avago Technologies Finance (Singapore)
10.125%, 12/01/13 (a)(b) 110 115,775
Flextronics International, Ltd. (Singapore)
6.50%, 5/15/13 (a) 175 166,250
Freescale Semiconductor, Inc.
7.125%, 7/15/14 (a) 110 111,100
Lucent Technologies, Inc.
6.45%, 3/15/29 (a) 80 68,000
6.50%, 1/15/28 (a) 40 33,600
Nortel Networks Corp. (Canada)
6.875%, 9/01/23 (a) 155 124,000
Sanmina-SCI Corp.
8.125%, 3/01/16 (a) 145 141,375
Serena Software, Inc.
10.375%, 3/15/16 (a)(b) 85 85,425
Sungard Data Systems, Inc.
9.125%, 8/15/13 (a)(b) 310 321,625
------------
1,167,150
TRANSPORTATION-1.6%
AMR Corp.
9.00%, 8/01/12 (a) 116 114,550
BNSF Funding Trust I
6.613%, 12/15/55 (a)(c) 280 262,836
Hertz Corp.
8.875%, 1/01/14 (a)(b) 105 107,625
10.50%, 1/01/16 (a)(b) 115 121,900
Horizon Lines LLC
9.00%, 11/01/12 (a) 88 89,320
------------
696,231
UTILITIES-11.9%
AES Corp.
8.75%, 5/15/13 (a)(b) 55 58,850
9.00%, 5/15/15 (a)(b) 100 107,500
Allegheny Energy Supply
7.80%, 3/15/11 (a) 140 145,250
8.25%, 4/15/12 (a)(b) 250 265,625
Aquila, Inc.
14.875%, 7/01/12 (a)(h) 135 178,538
CMS Energy Corp.
8.50%, 4/15/11 (a) 105 109,463
DPL, Inc.
6.875%, 9/01/11 (a) 90 92,795
Dynegy-Roseton Danskamme
Series B
7.67%, 11/08/16 (a) 195 194,513
Edison Mission Energy
7.50%, 6/15/13 (a)(b) 250 245,000
7.75%, 6/15/16 (a)(b) 80 78,600
FirstEnergy Corp.
Series B
6.45%, 11/15/11 (a) 100 101,752
Hawaiian Telcom Communications, Inc.
Series B
9.75%, 5/01/13 (a) 50 50,875
12.50%, 5/01/15 (a) 90 94,275
Level 3 Financing, Inc.
12.25%, 3/15/13 (a)(b) 453 481,312
Northwest Pipeline Corp.
8.125%, 3/01/10 (a) 105 109,200
Range Resources Corp.
7.50%, 5/15/16 (a) 110 108,625
Reliant Energy, Inc.
6.75%, 12/15/14 (a) 50 46,000
9.50%, 7/15/13 (a) 240 241,200
Sierra Pacific Power Co.
6.00%, 5/15/16 (a)(b) 85 80,813
Sierra Pacific Resources
8.625%, 3/15/14 (a) 130 137,715
Sonat, Inc.
7.625%, 7/15/11 (a) 131 132,965
Southern Natural Gas Co.
7.35%, 2/15/31 (a) 155 148,721
8.875%, 3/15/10 (a) 130 137,313
TECO Energy, Inc.
6.75%, 5/01/15 (a) 190 184,775
7.00%, 5/01/12 (a) 180 179,100
TXU Corp.
5.55%, 11/15/14 (a) 235 213,149
6.50%, 11/15/24 (a) 389 346,999
Williams Cos., Inc.
7.625%, 7/15/19 (a) 362 367,429
7.875%, 9/01/21 (a) 255 258,825
Windstream Corp.
8.125%, 8/01/13 (b) 98 99,960
8.625%, 8/01/16 (b) 77 78,733
------------
5,075,870
7
HIGH YIELD PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Total Corporate Debt Obligations
(cost $42,858,025) $ 41,721,357
PREFERRED STOCKS-0.7%
BROADCASTING/MEDIA-0.4%
ION Media Networks, Inc.
14.25%, 11/13/06 (a)(e) 19 163,875
FINANCIAL-0.3%
Sovereign REIT
Series A
12.00%, 5/16/20 (a)(b) 93 127,875
Total Preferred Stocks
(cost $243,037) 291,750
WARRANT-0.0%
Pliant Corp.
Warrants, expiring 6/01/10 (f)(g)(i)
(cost $1,820) 50 1
SHORT-TERM INVESTMENT-0.4%
TIME DEPOSIT-0.4%
The Bank of New York
4.25%, 7/03/06
(cost $185,000) $ 185 185,000
TOTAL INVESTMENTS-99.1%
(cost $43,287,882) 42,198,108
Other assets less liabilities-0.9% 393,042
NET ASSETS-100% $ 42,591,150
FORWARD EXCHANGE CURRENCY CONTRACTS (SEE NOTE D)
U.S. $
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
- -------------------------------------------------------------------------------
BUY CONTRACTS:
Euro, settling 7/18/06 33 $ 42,417 $ 42,422 $ 5
SALE CONTRACTS:
Euro, settling 7/18/06 186 239,517 237,560 1,957
(a) Positions, or portion thereof, with an aggregate market value of
$41,391,750 have been segregated to collateralize open forward exchange
currency contracts.
(b) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $10,814,299 or 25.4% of net assets.
(c) Variable rate coupon, rate shown as of June 30, 2006.
(d) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective until
final maturity.
(e) PIK (Paid-in-kind) preferred quarterly stock payments.
(f) Illiquid security, valued at fair value (see Note A).
(g) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities, which represent 0.06% of net assets as of June 30,
2006, are considered illiquid and restricted.
RESTRICTED ACQUISITION ACQUISITION MARKET PERCENTAGE OF
SECURITIES DATE COST VALUE NET ASSETS
- -------------------------------------------------------------------------------
Russell-Stanley
Holdings, Inc. 11/09/01-6/23/06 $ 497,070 $ 24,074 0.06%
9.00%, 11/30/08
Pliant Corp. 12/01/00 1,820 1 0.00%
Expiring 6/01/10
(h) The coupon on this security varies along with its rating. If its rating
falls below Baa3/BBB- by either Moody's or Standard & Poors, the coupon steps
up 50 basis points. The security is currently rated B2/B-.
(i) Security is in default and is non-income producing.
See Notes to Financial Statements.
8
HIGH YIELD PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $43,287,882) $ 42,198,108
Cash 852
Unrealized appreciation of forward exchange currency
contracts 1,962
Dividends and interest receivable 928,874
Receivable for investment securities sold 242,454
Total assets 43,372,250
LIABILITIES
Payable for investment securities purchased 622,758
Payable for capital stock redeemed 43,015
Administrative fee payable 19,607
Advisory fee payable 18,852
Distribution fee payable 2,313
Transfer agent fee payable 119
Accrued expenses 74,436
Total liabilities 781,100
NET ASSETS $ 42,591,150
COMPOSITION OF NET ASSETS
Capital stock, at par $ 6,205
Additional paid-in capital 57,554,197
Undistributed net investment income 1,605,521
Accumulated net realized loss on investment and foreign
currency transactions (15,487,064)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (1,087,709)
$ 42,591,150
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $32,029,602 4,665,042 $6.87
B $10,561,548 1,539,842 $6.86
See Notes to Financial Statements.
9
HIGH YIELD PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 1,890,630
Dividends 5,501
Total investment income 1,896,131
EXPENSES
Advisory fee 112,493
Distribution fee--Class B 13,796
Transfer agency--Class A 617
Transfer agency--Class B 201
Custodian 73,465
Administrative 39,000
Audit 20,248
Printing 12,866
Legal 1,321
Directors' fees 638
Miscellaneous 1,764
Total expenses 276,409
Net investment income 1,619,722
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 63,226
Foreign currency transactions (10,698)
Net change in unrealized appreciation/depreciation of:
Investments (1,107,353)
Foreign currency denominated assets and liabilities (2,360)
Net loss on investment and foreign currency transactions (1,057,185)
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 562,537
See Notes to Financial Statements.
10
HIGH YIELD PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 1,619,722 $ 3,763,141
Net realized gain (loss) on investment
and foreign currency transactions 52,528 (394,084)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (1,109,713) (2,640,883)
Net increase in net assets from
operations 562,537 728,174
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A (2,871,248) (3,194,538)
Class B (898,607) (947,882)
CAPITAL STOCK TRANSACTIONS
Net decrease (254,998) (5,932,748)
Total decrease (3,462,316) (9,346,994)
NET ASSETS
Beginning of period 46,053,466 55,400,460
End of period (including undistributed
net investment income of $1,605,521
and $3,755,654, respectively) $ 42,591,150 $ 46,053,466
See Notes to Financial Statements.
11
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein High Yield Portfolio (the "Portfolio") is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is to seek to earn the highest level of
current income without assuming undue risk by investing principally in high
yielding, fixed-income securities rated Baa or lower by Moody's or BBB or lower
by S&P Duff &Phelps or Fitch or, if unrated of comparable quantity. The
Portfolio is diversified as defined under the Investment Company Act of 1940.
The Fund was incorporated in the State of Maryland on November 17, 1987, as an
open-end series investment company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
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 .50% 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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .75% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
13
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolios to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 15,110,937 $ 16,944,817
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 937,157
Gross unrealized depreciation (2,026,931)
Net unrealized depreciation $ (1,089,774)
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
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
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 117,126 344,164 $ 871,611 $ 2,663,938
Shares issued
in reinvestment
of dividends 415,521 437,608 2,871,248 3,194,538
Shares redeemed (576,224) (1,449,302) (4,245,613) (11,126,952)
Net decrease (43,577) (667,530) $ (502,754) $ (5,268,476)
CLASS B
Shares sold 97,070 357,280 $ 723,003 $ 2,800,142
Shares issued
in reinvestment
of dividends 130,233 130,025 898,607 947,882
Shares redeemed (183,720) (570,154) (1,373,854) (4,412,296)
Net increase
(decrease) 43,583 (82,849) $ 247,756 $ (664,272)
15
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 4,142,420 $ 3,469,490
Total taxable distributions 4,142,420 3,469,490
Total distributions paid $ 4,142,420 $ 3,469,490
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 3,760,222
Accumulated capital and other losses (15,519,330)(a)
Unrealized appreciation/(depreciation) (2,826)(b)
Total accumulated earnings/(deficit) $ (11,761,934)
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$15,199,656 of which $2,200,265 expires in the year 2007, $5,774,960 expires in
the year 2008, $2,890,265 expires in the year 2009, $4,208,388 expires in the
year 2010, and $125,778 expires in the year 2013. To the extent future capital
gains are offset by capital loss carryforwards, such gains will not be
distributed. Based on certain provisions in the Internal Revenue Code, various
limitations regarding the future utilization of these carryforwards, brought
forward as a result of the Portfolio's merger with Brinson Series Trust High
Income Portfolio, may apply. During the current fiscal year, the Portfolio
utilized no capital loss carryforwards.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the realization for tax purposes of gains/losses on
certain derivative instruments.
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser
17
HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
either were voluntarily dismissed or removed to federal court. On February 20,
2004, the Judicial Panel on Multidistrict Litigation transferred all actions to
the United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fidu-
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ciary duties. Plaintiffs seek an unspecified amount of compensatory damages and
punitive damages, rescission of their contracts with the Adviser, including
recovery of all fees paid to the Adviser pursuant to such contracts, an
accounting of all fund-related fees, commissions and soft dollar payments, and
restitution of all unlawfully or discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
19
HIGH YIELD PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
----------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
--------------- ------------ ------------ ------------ --------- ------------
Net asset value,
beginning of period $7.43 $7.97 $7.91 $6.83 $7.51 $7.91
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (b) .27 .58 .60(c) .55 .54(c) .63(c)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions (.17) (.45) (.01) .95 (.76) (.38)
Net increase (decrease) in
net asset value from
operations .10 .13 .59 1.50 (.22) .25
LESS: DIVIDENDS
Dividends from net investment
Income (.66) (.67) (.53) (.42) (.46) (.65)
Net asset value, end of period $6.87 $7.43 $7.97 $7.91 $6.83 $7.51
TOTAL RETURN
Total investment return based
on net asset value (d) 1.24% 1.78% 7.98% 22.44% (3.03)% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $32,030 $34,968 $42,842 $48,076 $34,765 $31,283
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.15%(e)(f) 1.09% 1.04% 1.46% 1.18% .95%
Expenses, before waivers and
reimbursements 1.15%(e)(f) 1.09% 1.21% 1.46% 1.45% 1.51%
Net investment income 7.27%(e)(f) 7.58% 7.74%(c) 7.48% 7.78%(c) 8.08%(c)
Portfolio turnover rate 35% 54% 80% 105% 83% 95%
See footnote summary on page 21.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------------------------------------------
SIX MONTHS JULY 22,
ENDED YEAR ENDED DECEMBER 31, 2002(g) TO
JUNE 30, 2006 ---------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002
--------------- ------------ ------------ ------------ -------------
Net asset value,
beginning of period $7.41 $7.95 $7.91 $6.84 $6.45
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (b) .26 .56 .58(c) .52 .15(c)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions (.17) (.45) (.02) .97 .24
Net increase in net asset
value from operations .09 .11 .56 1.49 .39
LESS: DIVIDENDS
Dividends from net investment
Income (.64) (.65) (.52) (.42) -0-
Net asset value, end of period $6.86 $7.41 $7.95 $7.91 $6.84
TOTAL RETURN
Total investment return based
on net asset value (d) 1.10% 1.54% 7.62% 22.24% 6.05%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $10,561 $11,085 $12,558 $7,962 $366
Ratio to average net assets of:
Expenses, net of waivers
and reimbursements 1.40%(e)(f) 1.34% 1.30% 1.70% 1.42%(f)
Expenses, before waivers
and reimbursements 1.40%(e)(f) 1.34% 1.47% 1.70% 1.63%(f)
Net investment income 7.03%(e)(f) 7.33% 7.51%(c) 7.19% 8.39%(c)(f)
Portfolio turnover rate 35% 54% 80% 105% 83%
(a) As required, effective January 1, 2001, the Portfolio has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities. For the year ended
December 31, 2001, the effect of this change was to decrease net investment
income by less than $.01 per share, decrease net realized and unrealized loss
on investments by less than $.01 per share and decrease the ratio of net
investment income to average net assets from 8.14% to 8.08%.
(b) Based on average shares outstanding.
(c) Net of expenses waived or reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
(g) Commencement of distribution.
21
HIGH YIELD PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein High Yield Portfolio (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of funds with almost all Funds or Funds in each category having the
same advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
High Income 50 bp on 1st $2.5 billion High Yield Portfolio
45 bp on next $2.5 billion
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
High Yield Portfolio $69,000 0.13%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
High Yield Portfolio Class A 1.21% December 31
Class B 1.47%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
High Yield Portfolio $47.8 High Yield Schedule 0.546%
65 bp on 1st $20 m
50 bp on next $20 m
40 bp on next $20 m
35 bp on the balance
Minimum account size $20 m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to offshore mutual funds that invest in high yield fixed income
securities:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
U.S. High Yield 0.85%
Global High Yield 1.25%
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
23
HIGH YIELD PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
FUND ACITM MUTUAL FUND(4) FEE
- -------------------------------------------------------------------------------
High Yield Portfolio Alliance High Yield Open Fund (Kokusai) 1.00%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
High Yield Portfolio 0.500 0.650 3/15
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(8) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
High Yield Portfolio 1.041 0.757 45/47 0.865 15/15
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
(4) The name in parenthesis is the distributor of the fund.
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund increased during calendar 2004 relative to 2003.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent
and distribution related services to the Fund and receive transfer agent fees
and Rule 12b-1 payments. Additional information regarding distribution related
fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
High Yield Portfolio $25,437
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
High Yield Portfolio $48,940
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
25
HIGH YIELD PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
costs from the behavior of fund expenses; there was a lack of consensus among
researchers as to whether economies of scale were being passed on to the
shareholders. It is contemplated that additional work will be performed to
determine if the benefits of economies of scale or scope are being passed to
shareholders by the Adviser. In the meantime, it is clear that to the extent
the Fund's assets exceed the initial breakpoint its shareholders benefit from a
lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, and 5 year performance
rankings of the Fund(10) relative to its Lipper Performance Group(11) and
Lipper Performance Universe(12) for the period ended September 30, 2005.
HIGH YIELD PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 7/15 28/46
3 year 11/15 33/45
5 year 13/15 33/44
Set forth below are the 1, 3, 5 year and since inception performance returns of
the Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
HIGH YIELD PORTFOLIO 5.58 12.32 5.02 2.61
CSFB Bond Index 6.31 15.55 8.57 6.03
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
26
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ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN AMERICAS GOVERNMENT INCOME PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
> ARE NOT FDIC INSURED
> MAY LOSE VALUE
> ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEIN(R) AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE
MARKS USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
AMERICAS GOVERNMENT INCOME PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING EXPENSES ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE PAID DURING EXPENSE
AGIT JANUARY 1, 2006 JUNE 30, 2006 PERIOD* RATIO*
- -------------------------------------------------------------------------------
CLASS A
Actual $1,000 $ 964.43 $5.89 1.21%
Hypothetical
(5% return
before expenses) $1,000 $1,018.79 $6.06 1.21%
CLASS B
Actual $1,000 $ 963.21 $6.86 1.41%
Hypothetical
(5% return
before expenses) $1,000 $1,017.80 $7.05 1.41%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
AMERICAS GOVERNMENT INCOME PORTFOLIO
SECURITY TYPE BREAKDOWN
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PERCENT OF
SECURITY TYPE U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Government/Agency Obligations $28,910,092 65.7%
U.S. Treasury Securities 24,563,578 55.8
Total Investments* 53,473,670 121.5
Cash and receivables,
net of liabilities (9,464,661) (21.5)
Net Assets $44,009,009 100.0%
* Excludes short-term investments.
2
AMERICAS GOVERNMENT INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
LONG-TERM INVESTMENTS-121.5%
CANADA-15.2%
GOVERNMENT/AGENCY
OBLIGATIONS-15.2%
Government of Canada
3.00%, 12/01/36 (a) CAD 250 $ 281,826
4.25%, 9/01/09 (a) 1,000 890,182
5.00%, 6/01/14 (a) 648 597,016
5.75%, 6/01/33 (a) 1,973 2,074,982
8.00%, 6/01/27 (a) 1,132 1,463,700
Province of Ontario
2.00%, 12/01/36 (a) 586 512,509
5.60%, 6/02/35 (a) 300 287,829
Province of Quebec
5.50%, 12/01/14 (a) 600 558,253
Total Canadian Securities
(cost $6,253,703) 6,666,297
MEXICO-23.6%
GOVERNMENT/AGENCY
OBLIGATIONS-23.6%
Mexican Government Bonds
Series M7
8.00%, 12/24/08 (a) MXP 87,609 7,705,289
Series M20
8.00%, 12/07/23 (a) 15,500 1,194,489
10.00%, 12/05/24 (a) 16,205 1,498,478
Total Mexican Securities
(cost $10,198,017) 10,398,256
UNITED STATES-82.7%
U.S. GOVERNMENT SPONSORED
AGENCY OBLIGATIONS-26.9%
Federal National Mortgage
Association
4.125%, 4/15/14 (a) US$ 2,000 1,827,384
5.375%, 11/15/11 (a) 5,000 4,976,945
7.00%, TBA (a) 74 75,523
Government National Mortgage
Association
6.00%, TBA US$ 5,000 4,957,810
9.00%, 9/15/24 (a) 7 7,877
11,845,539
U.S. TREASURY SECURITIES-55.8%
U.S. Treasury Bond
6.25%, 5/15/30 (a) 5,200 5,889,811
U.S. Treasury Notes
1.625%, 1/15/15 (TIPS)(a) 626 583,204
3.50%, 11/15/09 (b) 4,915 4,671,747
4.00%, 9/30/07 (a)(b) 2,606 2,567,113
4.25%, 11/15/13-8/15/15 (a) 735 693,045
4.50%, 11/15/15 (a) 886 843,915
4.875%, 2/15/12 (a) 150 148,359
U.S. Treasury Strips
Zero Coupon,
5/15/13-11/15/21 (a) 17,700 9,166,384
24,563,578
Total United States Securities
(cost $36,718,724) 36,409,117
Total Long-Term Investments
(cost $53,170,444) 53,473,670
SHORT-TERM INVESTMENT-1.3%
TIME DEPOSIT-1.3%
The Bank of New York
4.25%, 7/03/06
(cost $563,000) 563 563,000
TOTAL INVESTMENTS-122.8%
(cost $53,733,444) 54,036,670
OTHER ASSETS LESS
LIABILITIES-(22.8%) (10,027,661)
NET ASSETS-100% $ 44,009,009
3
AMERICAS GOVERNMENT INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
FORWARD EXCHANGE CURRENCY CONTRACTS (SEE NOTE D)
U.S. $
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
(000) DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------
BUY CONTRACTS
Canadian Dollar,
settling 7/10/06 305 $ 275,581 $ 273,376 $ (2,205)
Canadian Dollar,
settling 7/10/06 2,009 1,800,297 1,800,228 (69)
Canadian Dollar,
settling 7/10/06 906 805,036 811,688 6,652
SALE CONTRACTS
CANADIAN DOLLAR,
settling 7/10/06 6,222 5,654,769 5,574,424 80,345
Mexican Peso,
settling 7/24/06 47,457 4,229,079 4,179,698 49,381
Mexican Peso,
settling 7/24/06 19,556 1,702,082 1,722,338 (20,256)
REVERSE REPURCHASE AGREEMENT (SEE NOTE D)
BROKER INTEREST RATE MATURITY AMOUNT
- -------------------------------------------------------------------------------
Greenwich Capital Markets 5.05% 7/11/06 $ 5,680,064
(a) Positions, or portions thereof, with an aggregate market value of
$47,816,845, have been segregated to collateralize open forward exchange
currency contracts.
(b) Positions, or portions thereof, with an aggregate market value of
$5,690,004, have been segregated to collateralize reverse repurchase agreements.
Currency Abbreviations:
CAD - Canadian Dollar
MXP - Mexican Peso
US$ - United States Dollar
Glossary of Terms:
TBA - To Be Assigned-Securities are purchased on a forward commitment
with an approximate principal amount (generally +/-1.0%) and no definite
maturity date. The actual principal amount and maturity date will be determined
upon settlement when the specific mortgage pools are assigned.
TIPS - Treasury Inflation Protected Security
See Notes to Financial Statements.
4
AMERICAS GOVERNMENT INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $53,733,444) $ 54,036,670
Foreign cash, at value (cost $474,143) 474,168
Unrealized appreciation of forward exchange
currency contracts 136,378
Interest receivable 226,319
Total assets 54,873,535
LIABILITIES
Due to custodian 4,871
Unrealized depreciation of forward exchange
currency contracts 22,530
Reverse repurchase agreements 5,680,064
Payable for investment securities purchased 4,984,583
Payable for capital stock redeemed 40,521
Advisory fee payable 19,773
Administrative fee payable 19,607
Distribution fee payable 1,598
Transfer agent fee payable 119
Accrued expenses 90,860
Total liabilities 10,864,526
NET ASSETS $ 44,009,009
COMPOSITION OF NET ASSETS
Capital stock, at par $ 3,776
Additional paid-in capital 43,787,014
Distributions in excess of net investment income (717,441)
Accumulated net realized gain on investment and
foreign currency transactions 518,437
Net unrealized appreciation of investments and
foreign currency denominated
assets and liabilities 417,223
$ 44,009,009
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $36,706,874 3,149,154 $11.66
B $ 7,302,135 626,477 $11.66
See Notes to Financial Statements.
5
AMERICAS GOVERNMENT INCOME PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 1,580,739
EXPENSES
Advisory fee 131,125
Distribution fee--Class B 12,822
Transfer agency--Class A 647
Transfer agency--Class B 141
Custodian 69,870
Administrative 39,000
Audit 20,248
Printing 15,399
Legal 1,559
Directors' fees 606
Miscellaneous 1,967
Total expenses before interest expense 293,384
Interest expense 37,716
Total expenses 331,100
Net investment income 1,249,639
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on:
Investment transactions 420,856
Foreign currency transactions 103,662
Net change in unrealized
appreciation/depreciation of:
Investments (3,988,235)
Foreign currency denominated assets and
liabilities 266,380
Net loss on investment and foreign
currency transactions (3,197,337)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(1,947,698)
See Notes to Financial Statements.
6
AMERICAS GOVERNMENT INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,249,639 $ 3,037,265
Net realized gain (loss) on investment and
foreign currency transactions 524,518 (191,718)
Net change in unrealized appreciation/
depreciation of investments and foreign
currency denominated assets and
liabilities (3,721,855) 1,725,011
Net increase (decrease) in net assets
from operations (1,947,698) 4,570,558
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (2,741,951) (3,193,187)
Class B (499,544) (772,040)
Net realized gain on investment and foreign
currency transactions
Class A (121,729) -0-
Class B (23,343) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (9,696,718) 1,266,132
Total increase (decrease) (15,030,983) 1,871,463
NET ASSETS
Beginning of period 59,039,992 57,168,529
End of period (including distributions in
excess of net investment income
and undistributed net investment
income of ($717,441) and $1,274,415,
respectively) $ 44,009,009 $ 59,039,992
See Notes to Financial Statements.
7
AMERICAS GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Americas Government Income Portfolio (the "Portfolio") is
a series of AllianceBernstein Variable Products Series Fund, Inc., (the
"Fund"). The Portfolio's investment objective is to seek the highest level of
current income, consistent with what AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (the "Adviser") considers
to be prudent investment risk, that is available from a portfolio of debt
securities issued or guaranteed by the government of the United States, Canada,
or Mexico, their political subdivisions (including Canadian provinces, but
excluding States of the United States), agencies, instrumentalities or
authorities. The Portfolio is non-diversified as defined under the Investment
Company Act of 1940. The Fund was incorporated in the State of Maryland on
November 17, 1987, as an open-end series investment company. The Fund offers
twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, The Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted price on a security; and OTC and other derivatives are
valued on the basis of a quoted bid price or spread from a major broker/dealer
in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
8
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holdings 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 interest, dividends 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 investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the trade date securities
are purchased or sold. Investment gains and losses are determined on the
identified cost basis. The Portfolio amortizes premiums and accretes discounts
as adjustments to interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
7. REPURCHASE AGREEMENTS
It is the policy of the Portfolio that its custodian or designated subcustodian
take control of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of collateral by the
Portfolio may be delayed or limited.
9
AMERICAS GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .50% 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. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .65% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.) a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
- -------------------------------------------------------------------------------
Investment securities (excluding
U.S. government securities) $ 16,120,620 $ 22,063,557
U.S. government securities 14,120 58,232
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 884,099
Gross unrealized depreciation (580,873)
Net unrealized appreciation $ 303,226
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
1. FINANCIAL FUTURES CONTRACTS
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse affects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments and the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities hedged or used for cover.
At the time the Portfolio enters into a futures contract, the Portfolio
deposits and maintains as collateral an initial margin with the broker, as
required by the exchange on which the transaction is effected. 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 a contract. 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.
2. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as unrealized appreciation and
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Portfolio has in that particular
currency contract.
3. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
11
AMERICAS GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
4. REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Portfolio sells securities and agrees
to repurchase them at a mutually agreed upon date and price. At the time the
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account with the custodian containing liquid assets having a value
at least equal to the repurchase price.
For the six months ended June 30, 2006, the average amount of reverse
repurchase agreements outstanding was $1,500,281 and the daily weighted average
interest rate was 4.79%.
5. DOLLAR ROLLS
The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the
Portfolio of securities for delivery in the current month and the Portfolio's
simultaneously contracting to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll period, the
Portfolio forgoes principal and interest paid on the securities. The Portfolio
is compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale. Dollar
rolls involve the risk that the market value of the securities the Portfolio is
obligated to repurchase under the agreement may decline below the repurchase
price. Dollar rolls are speculative techniques and may be considered to be
borrowings by the Portfolio. For the six months ended June 30, 2006, the
Portfolio earned income of $22,842 from dollar rolls which is included in
interest income in the accompanyng 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
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 158,914 655,276 $ 2,032,938 $ 8,404,299
Shares issued in
reinvestment of
dividends and
distributions 244,133 254,032 2,863,680 3,193,186
Shares redeemed (756,664) (1,106,405) (9,503,319) (14,177,377)
Net decrease (353,617) (197,097) $(4,606,701) $(2,579,892)
CLASS B
Shares sold 28,946 612,616 $ 371,867 $ 7,934,755
Shares issued in
reinvestment of
dividends and
distributions 44,577 61,468 522,887 772,040
Shares redeemed (468,891) (380,602) (5,984,771) (4,860,771)
Net increase
(decrease) (395,368) 293,482 $ (5,090,017) $ 3,846,024
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Interest Rate Risk and Credit Risk-- Interest rate risk is the risk that
changes in interest rates will affect the value of the Portfolio's investments
in fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
Leverage Risk--The Portfolio may use significant borrowings for leverage or may
otherwise leverage its assets through, for example, the use of reverse
repurchase agreements or dollar rolls. When the Portfolio borrows money or
otherwise leverage its portfolio, it may be volatile because leverage tends to
exaggerate the effect of any increase or decrease in the value of the
Portfolio's investments. Reverse repurchase agreements and dollar rolls also
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
- -------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 3,965,227 $ 3,067,772
Total taxable distributions 3,965,227 3,067,772
Total distributions paid $ 3,965,227 $ 3,067,772
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 3,234,616
Undistributed long-term capital gains 138,944
Accumulated capital and other losses (2,112,367)(a)
Unrealized appreciation/(depreciation) 4,291,291(b)
Total accumulated earnings/(deficit) $ 5,552,484
(a) During the current fiscal year, the portfolio utilized capital loss
carryforwards of $27,392. For the year ended December 31, 2005, the Portfolio
deferred losses on straddles of $2,112,367.
(b) The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the realization for
tax purposes of gains/losses on certain derivative instruments.
13
AMERICAS GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser
14
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
either were voluntarily dismissed or removed to federal court. On February 20,
2004, the Judicial Panel on Multidistrict Litigation transferred all actions to
the United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their
15
AMERICAS GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
contracts with the Adviser, including recovery of all fees paid to the Adviser
pursuant to such contracts, an accounting of all fund-related fees, commissions
and soft dollar payments, and restitution of all unlawfully or discriminatorily
obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
16
AMERICAS GOVERNMENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
---------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2006 ---------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $13.06 $12.91 $13.01 $12.65 $12.17 $12.72
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .31 .70 .65(c) .61 .67(c) .92(c)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions (.77) .38 (.06) .34 .61 (.43)
Net increase (decrease) in net asset
value from operations (.46) 1.08 .59 .95 1.28 .49
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.90) (.93) (.69) (.59) (.73) (.91)
Distributions from net realized gain
on investment transactions (.04) -0- -0- -0- (.07) (.13)
Total dividends and distributions (.94) (.93) (.69) (.59) (.80) (1.04)
Net asset value, end of period $11.66 $13.06 $12.91 $13.01 $12.65 $12.17
TOTAL RETURN
Total investment return based on
net asset value (d) (3.56)% 8.67% 4.89% 7.35% 10.99% 3.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $36,707 $45,730 $47,776 $60,550 $72,307 $51,146
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.21%(e)(f) 1.28% 1.00% 1.04% .93% .95%
Expenses, before waivers and
reimbursements 1.21%(e)(f) 1.28% 1.11% 1.04% 1.05% 1.15%
Expenses, before waivers and
reimbursements, excluding interest
expense 1.06%(e)(f) 1.02% .98% 1.04% .93% .95%
Net investment income 4.83%(e)(f) 5.42% 5.07%(c) 4.75% 5.45%(c) 7.35%(c)
Portfolio turnover rate 28% 75% 69% 73% 60% 57%
See footnote summary on page 18.
17
AMERICAS GOVERNMENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
--------------------------------------------------------------------
SIX MONTHS JULY 22, 2002 (g)
ENDED YEAR ENDED DECEMBER 31, TO
JUNE 30, 2006 ------------------------------------- DECEMBER 31,
(UNAUDITED) 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $13.03 $12.90 $13.01 $12.67 $12.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .29 .66 .62(c) .57 .42(c)
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions (.76) .38 (.06) .36 .21
Net increase (decrease) in net asset
value from operations (.47) 1.04 .56 .93 .63
LESS: DIVIDENDS
Dividends from net investment income (.86) (.91) (.67) (.59) -0-
Distributions from net realized gain
on investmenttransactions (.04) -0- -0- -0- -0-
Total dividends and distributions (.90) (.91) (.67) (.59) -0-
Net asset value, end of period $11.66 $13.03 $12.90 $13.01 $12.67
TOTAL RETURN
Total investment return based on
net asset value (d) (3.68)% 8.33% 4.67% 7.18% 5.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $7,302 $13,310 $9,393 $5,698 $236
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.41%(e)(f) 1.53% 1.27% 1.30% 1.36%(f)
Expenses, before waivers and
reimbursements 1.41%(e)(f) 1.53% 1.37% 1.30% 1.48%(f)
Expenses, before waivers and
reimbursements, excluding
interest expense 1.29%(e)(f) 1.27% 1.24% 1.30% 1.36%(f)
Net investment income 4.58%(e)(f) 5.17% 4.88%(c) 4.42% 4.72%(c)(f)
Portfolio turnover rate 28% 75% 69% 73% 60%
(a) As required, effective January 1, 2001, the Portfolio has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities. For the year ended
December 31, 2001, the effect of this change was to decrease net investment
income per share by $.04, increase net realized and unrealized (loss) on
investments per share by $.04, and decrease the ratio of net investment income
to average net assets from 7.61% to 7.35%.
(b) Based on average shares oustanding.
(c) Net of expenses waived or reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
(g) Commencement of distribution.
18
AMERICAS GOVERNMENT INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Americas Government Income Portfolio (the "Fund"), prepared
by Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON %
OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- ------------------------------------------------------------------------------
High Income 50 bp on 1st $2.5 billion Americas Government
45 bp on next $2.5 billion Income Portfolio
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Americas Government Income Portfolio $69,000 0.11%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
19
AMERICAS GOVERNMENT INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Americas Government Class A 0.98% December 31
Income Portfolio Class B 1.24%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund that invests in fixed income
securities:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Fixed Income 0.65%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
20
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Americas Government
Income Portfolio 0.500 0.758 2/10
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
EXPENSE LIPPER LIPPER LIPPER LIPPER
RATIO UNIVERSE UNIVERSE GROUP GROUP
FUND (%)(7) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Americas Government
Income Portfolio 0.981 0.978 9/13 0.978 7/10
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide
(4) It should be noted that "effective management fee" is calculated by
lipper using the fund's contractual management fee rate at a hypothetical asset
level. The hypothetical asset level is based on the combined net assets of all
classes of the fund, rounded up to the next $25 million. Lipper's total expense
ratio information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the fund has the lowest effective fee rate
in the lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the fund to the
adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the fund.
(5) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(6) Except for asset (size) comparability and load type, Lipper uses the
same criteria for selecting a Lipper Expense Group when selecting a Lipper
Expense Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe
allows for the same adviser to be represented by more than just one fund.
(7) Most recent fiscal year end Class A share total expense ratio.
21
AMERICAS GOVERNMENT INCOME PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
transfer agent and distribution related services to the Fund and receive
transfer agent fees and Rule 12b-1 payments. Additional information regarding
distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12b-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Americas Government Income Portfolio $19,426
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Americas Government Income Portfolio $47,266
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(8) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
(8) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
22
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(9) relative to its Lipper Performance Group(10) and Lipper
Performance Universe(11) for the period ended September 30, 2005.
AMERICAS GOVERNMENT INCOME PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 3/10 4/13
3 year 9/10 10/13
5 year 8/10 10/13
10 year 1/7 2/10
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(12) versus its benchmark(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
SINCE
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION
- -------------------------------------------------------------------------------
AMERICAS GOVERNMENT
INCOME PORTFOLIO 8.59 6.83 7.19 9.43 8.15
Lehman Brothers
Aggregate Bond
Index 2.80 3.96 6.62 6.55 7.03
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(9) The performance rankings are for the Class A shares of the Fund.
(10) The Lipper Performance Group is identical to the Lipper Expense Group.
(11) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(12) The performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
23
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
JUNE 30, 2006
SEMI-ANNUAL REPORT
> ALLIANCEBERNSTEIN U.S. GOVERNMENT/
HIGH GRADE SECURITIES PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
o ARE NOT FDIC INSURED
o MAY LOSE VALUE
o ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEINR AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE MARKS
USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenes you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenes 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
UTILITY INCOME PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------------------------------------------------------------------------------------------------------
CLASS A
Actual $ 1,000 $ 991.68 $ 3.75 0.76%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,021.03 $ 3.81 0.76%
CLASS B
Actual $ 1,000 $ 989.71 $ 4.98 1.01%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,019.79 $ 5.06 1.01%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
SECURITY TYPE BREAKDOWN
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
SECURITY TYPE U.S. $ VALUE PERCENT OF NET ASSETS
------------ ---------------------
Government/Agency Obligations $ 48,956,939 50.3%
Corporate Debt Obligations 21,312,115 21.9
Commercial Mortgage Backed Securities 11,073,537 11.4
Asset Backed Securities 5,586,412 5.7
Non-Agency Collateralized Mortgage
Obligations 4,598,994 4.7
Sovereign Debt Obligations 1,922,556 2.0
Federal Agency Collateralized Mortgage
Obligation 1,077,645 1.1
------------ -----
Total Investments* 94,528,198 97.1
Cash and receivables, net of liabilities 2,793,480 2.9
------------ -----
Net Assets $ 97,321,678 100.0%
* Excludes short-term investments.
2
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------
U.S. GOVERNMENT &
GOVERNMENT
SPONSORED AGENCY
OBLIGATIONS-50.3%
MORTGAGE
PASS-THROUGHS-44.8%
Federal Gold Loan Mortgage
Corp.
4.50%, 8/01/35-10/01/35 $ 2,217 $ 2,011,380
5.00%, 4/01/21 1,158 1,114,279
Federal National Mortgage
Association
4.175%, 9/01/35 (a) 502 494,724
4.235%, 9/01/34 (a) 488 483,573
4.249%, 8/01/34 (a) 494 489,518
4.50%, 4/01/20-3/01/21 2,975 2,811,694
4.662%, 7/01/35 (a) 483 476,931
4.77%, 4/01/35 (a) 191 189,546
5.00%, 4/01/19-4/01/21 4,204 4,053,998
5.00%, TBA 2,935 2,743,309
5.50%, 2/01/14-2/01/35 9,981 9,673,782
5.50%, TBA 8,505 8,167,453
5.815%, 3/01/36 (a) 550 548,627
6.00%, TBA 5,055 4,974,433
6.50%, 1/01/36 405 408,077
6.50%,TBA 2,995 3,009,975
Government National
Mortgage Association
6.00%, 3/15/36 1,948 1,933,189
-------------
43,584,488
-------------
U.S. TREASURY
SECURITIES-5.5%
U.S. Treasury Bonds
5.375%, 2/15/31 2,125 2,161,690
7.25%, 5/15/16 1,730 2,003,151
U.S. Treasury Note
4.875%, 5/31/11 1,220 1,207,610
-------------
5,372,451
-------------
Total U.S. Government &
Government Sponsored
Agency Obligations
(cost $49,890,328) 48,956,939
-------------
CORPORATE DEBT
OBLIGATIONS-21.9%
AEROSPACE &
DEFENSE-0.3%
Raytheon Co.
6.75%, 8/15/07 166 167,612
Textron, Inc.
6.375%, 11/15/08 125 126,810
-------------
294,422
-------------
AUTOMOTIVE-0.1%
Daimler Chrysler NA
Holdings Corp.
4.875%, 6/15/10 110 105,149
-------------
BANKING-2.9%
Barclays Bank Plc
(United Kingdom)
8.55%, 9/29/49 (b)(c) 365 402,487
Huntington National Bank
4.375%, 1/15/10 250 239,978
JPMorgan Chase & Co.
6.75%, 2/01/11 425 441,742
RBS Capital Trust III
5.512%, 9/29/49 (c) 335 312,316
Sanwa Bank
7.40%, 6/15/11 100 106,126
Sumitomo Mitsui Banking
Corp. (Japan)
5.625%, 7/15/49 (b)(c) 100 93,262
UBS Preferred Funding Trust 1
8.622%, 10/31/49 (c) 180 197,081
UFJ Finance Aruba AEC
(Aruba)
6.75%, 7/15/13 240 250,027
Wachovia Capital Trust III
5.80%, 3/15/42 (c) 180 174,672
Washington Mutual, Inc.
4.00%, 1/15/09 310 297,706
Wells Fargo & Co.
4.20%, 1/15/10 195 186,346
Zions Bancorp
5.50%, 11/16/15 135 128,660
-------------
2,830,403
-------------
BROADCASTING/
MEDIA-0.9%
BSKYB Finance (UK) Ltd.
(United Kingdom)
5.625%, 10/15/15 (b) 210 198,879
News America, Inc.
6.55%, 3/15/33 125 116,522
Time Warner
Entertainment Co. LP
8.375%, 3/15/23 315 350,271
WPP FINANCE (UK) CORP.
(United Kingdom)
5.875%, 6/15/14 175 169,569
-------------
835,241
-------------
BUILDING/REAL ESTATE-0.3%
iStar Financial, Inc.
5.15%, 3/01/12 125 118,849
Simon Property Group LP
6.375%, 11/15/07 145 145,604
-------------
264,453
-------------
3
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------
CABLE-1.0%
AT&T Broadband Corp.
9.455%, 11/15/22 $ 160 $ 198,800
British Sky Broadcasting Plc
(United Kingdom)
6.875%, 2/23/09 100 102,381
Comcast Cable
Communications, Inc.
6.875%, 6/15/09 250 257,228
Comcast Corp.
5.30%, 1/15/14 155 145,830
5.50%, 3/15/11 275 270,081
-------------
974,320
-------------
CHEMICALS-0.1%
Lubrizol Corp.
4.625%, 10/01/09 120 115,540
-------------
COMMUNICATIONS-1.9%
AT&T Corp.
8.00%, 11/15/31 60 68,886
British Telecom Plc
(United Kingdom)
8.375%, 12/15/10 (d) 450 494,041
Sprint Capital Corp.
8.375%, 3/15/12 490 541,400
Telecom Italia Capital SA
(Luxembourg)
4.00%, 11/15/08-1/15/10 595 559,609
6.375%, 11/15/33 75 67,812
Verizon Global Funding Corp.
4.900%, 9/15/15 140 126,574
-------------
1,858,322
-------------
COMMUNICATIONS-
FIXED-0.2%
Embarq Corp.
6.738%, 6/01/13 20 19,940
Vodafone Group Plc
5.50%, 6/15/11 230 224,655
-------------
244,595
-------------
COMMUNICATIONS-
MOBILE-1.0%
AT&T Wireless Services, Inc.
7.875%, 3/01/11 460 495,476
8.75%, 3/01/31 145 177,773
Telus Corp. (Canada)
7.50%, 6/01/07 335 339,903
-------------
1,013,152
-------------
CONGLOMERATES/
MISCELLANEOUS-0.2%
Hutchison Whampoa
International Ltd.
(Cayman Islands)
7.45%, 11/24/33 (b) 185 195,556
-------------
CONSUMER
MANUFACTURING-0.3%
Textron Financial Corp.
Series E
4.125%, 3/03/08 315 306,898
-------------
ENERGY-1.2%
Amerada Hess Corp.
7.875%, 10/01/29 225 251,026
ConocoPhillips Holdings Co.
6.95%, 4/15/29 225 244,833
Duke Energy Field Services LLC
7.875%, 8/16/10 70 74,818
Enterprise Products
Operating LP
Series B
5.60%, 10/15/14 125 118,332
Kinder Morgan Finance
5.35%, 1/05/11 170 156,627
Valero Energy Corp.
6.875%, 4/15/12 255 264,323
7.50%, 4/15/32 26 28,228
-------------
1,138,187
-------------
FINANCIAL-3.6%
American General Finance Corp.
4.625%, 5/15/09 340 330,091
Boeing Capital Corp.
4.75%, 8/25/08 210 206,366
CIT Group, Inc.
7.75%, 4/02/12 460 498,655
Core Investment Grade Trust
4.659%, 11/30/07 575 565,675
Countrywide Home Loans, Inc.
4.00%, 3/22/11 330 303,608
Series K
4.25%, 12/19/07 265 259,627
General Electric Capital Corp.
4.375%, 11/21/11 35 32,877
Goldman Sachs Group, Inc.
4.75%, 7/15/13 165 153,512
Household Finance Corp.
6.50%, 11/15/08 425 432,511
7.00%, 5/15/12 195 205,204
MBNA Corp.
4.625%, 9/15/08 290 283,929
MUFG Capital Finance 1 Ltd.
(Cayman Islands)
6.346%, 7/29/49 (c) 105 101,282
Resona Preferred Global
Securities (Cayman Islands)
7.191%, 12/30/49 (b)(c) 135 135,417
-------------
3,508,754
-------------
4
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------
FOOD/BEVERAGE-0.5%
Altria Group, Inc.
7.75%, 1/15/27 $ 70 $ 78,546
Conagra Foods, Inc.
6.75%, 9/15/11 43 44,323
7.875%, 9/15/10 102 109,138
Kroger Co.
7.80%, 8/15/07 225 229,005
-------------
461,012
-------------
HEALTH CARE-1.2%
Anthem, Inc.
3.50%, 9/01/07 315 306,097
Humana, Inc.
6.30%, 8/01/18 215 209,503
WellPoint, Inc.
3.75%, 12/14/07 80 77,733
4.25%, 12/15/09 405 386,298
Wyeth
5.50%, 2/01/14 186 179,721
-------------
1,159,352
-------------
INDUSTRIAL-0.2%
Tyco International Group SA
(Luxembourg)
6.00%, 11/15/13 155 153,558
-------------
INSURANCE-0.9%
Assurant, Inc.
5.625%, 2/15/14 155 148,680
Liberty Mutual Group
5.75%, 3/15/14 (b) 195 183,157
Zurich Capital Trust I
8.376%, 6/01/37 (b) 490 517,991
-------------
849,828
-------------
METALS & MINING-0.1%
Ispat Inland ULC (Canada)
9.75%, 4/01/14 95 104,738
-------------
PAPER/PACKAGING-0.6%
International Paper Co.
5.30%, 4/01/15 220 202,589
Packaging Corp. of America
5.75%, 8/01/13 155 147,376
Westvaco Corp.
8.20%, 1/15/30 75 81,237
Weyerhaeuser Co.
5.95%, 11/01/08 175 175,139
-------------
606,341
-------------
PUBLIC UTILITIES-
ELECTRIC & GAS-3.2%
Carolina Power & Light Co.
6.50%, 7/15/12 335 344,225
Consumers Energy Co.
Series C
4.25%, 4/15/08 130 126,355
Duke Capital LLC
8.00%, 10/01/19 250 282,662
Exelon Corp.
6.75%, 5/01/11 220 227,582
First Energy Corp.
Series B
6.45%, 11/15/11 265 269,643
Series C
7.375%, 11/15/31 270 289,670
MidAmerican Energy
Holdings Co.
5.875%, 10/01/12 195 193,437
NiSource Finance Corp.
7.875%, 11/15/10 190 203,267
Pacific Gas & Electric
4.80%, 3/01/14 215 200,349
6.05%, 3/01/34 40 37,753
Progress Energy, Inc.
7.10%, 3/01/11 185 192,983
Public Service Company of
Colorado
7.875%, 10/01/12 200 221,002
SPI Electricity & Gas Australia
Holdings Pty Ltd. (Australia)
6.15%, 11/15/13 (b) 235 233,759
Xcel Energy, Inc.
7.00%, 12/01/10 260 270,826
-------------
3,093,513
-------------
PUBLIC UTILITIES-
TELEPHONE-0.2%
Verizon New Jersey, Inc.
Series A
5.875%, 1/17/12 170 166,356
-------------
SERVICE-0.2%
Waste Management, Inc.
6.875%, 5/15/09 205 210,776
-------------
SUPERMARKETS &
DRUGS-0.2%
Safeway, Inc.
4.125%, 11/01/08 73 70,105
4.80%, 7/16/07 85 84,030
6.50%, 3/01/11 65 65,693
-------------
219,828
-------------
TECHNOLOGY-0.6%
Cisco Systems, Inc.
5.25%, 2/22/11 90 88,331
IBM Corp.
4.375%, 6/01/09 90 87,232
Motorola, Inc.
7.625%, 11/15/10 22 23,559
Oracle Corp.
5.25%, 1/15/16 430 402,699
-------------
601,821
-------------
Total Corporate Debt
Obligations
(cost $21,755,852) 21,312,115
-------------
5
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------
COMMERCIAL
MORTGAGE BACKED
SECURITIES-11.4%
Banc of America Commercial
Mortgage, Inc.
Series 2001-PB1 Cl. A2
5.787%, 5/11/35 $ 341 $ 340,915
Series 2004-4 Cl. A3
4.128%, 7/10/42 410 391,829
Series 2004-6 Cl. A2
4.161%, 12/10/42 525 500,446
Series 2005-6 Cl. A4
5.182%, 9/10/47 (c) 680 648,441
Bear Stearns Commercial
Mortgage Securities
Series 2005-PWR7 A3
5.116%, 2/11/41 (c) 505 478,658
Series 2005-T18 Cl. A4
4.933%, 2/13/42 (c) 530 495,534
CS First Boston Mortgage
Securities Corp.
Series 2003-CK2 Cl. A2
3.861%, 3/15/36 360 348,502
Series 2005-C1 Cl. A4
5.014%, 2/15/38 (c) 450 422,964
GE Capital Commercial
Mortgage Corp.
Series 2005-C3 Cl. A3FX
4.863%, 7/10/45 455 440,376
Greenwich Capital Commercial
Funding Corp.
Series 2003-C1 Cl. A4
4.111%, 7/05/35 450 407,801
Series 2005-GG3 Cl. A2
4.305%, 8/10/42 530 507,724
GS Mortgage Securites Corp. II
Series 2004-GG2 Cl. A6
5.396%, 8/10/38 (c) 300 290,598
JPMorgan Chase Commercial
Mortgage Securities Corp.
Series 2004-C1 Cl. A2
4.302%, 1/15/38 95 89,159
Series 2005-LDP1 Cl. A4
5.038%, 3/15/46 (c) 550 517,281
Series 2005-LDP3 Cl. A2
4.851%, 8/15/42 405 391,481
Series 2005-LDP4 Cl. A2
4.79%, 10/15/42 465 448,697
Series 2005-LDP5 Cl. A2
5.198%, 12/15/44 360 352,019
Series 2006-CB14 Cl. A4
5.481%, 12/12/44 (c) 195 188,920
Series 2006-CB15 Cl. A4
5.814%, 6/12/43 (c) 290 287,115
LB-UBS Commercial
Mortgage Trust
Series 2004-C4 Cl. A4
5.305%, 6/15/29 (c) 830 806,270
Series 2004-C8 Cl. A2
4.201%, 12/15/29 420 400,390
Series 2005-C1 Cl. A4
4.742%, 2/15/30 365 337,621
Series 2005-C7 Cl. A4
5.197%, 11/15/30 (c) 340 323,711
Merrill Lynch Mortgage Trust
Series 2005-CKI1 Cl. A6
5.417%, 11/12/37 (c) 280 268,447
Series 2005-MKB2 Cl. A2
4.806%, 9/12/42 655 635,422
Merrill Lynch/Countrywide
Commercial Mortgage Trust
Series 2006-2 Cl. A4
5.91%, 6/12/46 (c) 145 145,624
Morgan Stanley Capital I
Series 2005-T17 Cl. A5
4.78%, 12/13/41 655 607,592
-------------
Total Commercial Mortgage
Backed Securities
(cost $11,558,576) 11,073,537
-------------
ASSET-BACKED
SECURITIES-5.7%
Aegis Asset Backed Securities Trust
Series 2004-3 Cl. A2A
5.523%, 9/25/34 (a) 94 93,901
Asset Backed Funding
Certificates
Series 2003-WF1 Cl. A2
5.831%, 12/25/32 (a) 136 136,415
Bear Stearns Asset Backed
Securities, Inc.
Series 2005-SD1 Cl. 1A1
5.473%, 4/25/22 (a) 128 127,961
Capital Auto Receivables Asset
Trust
Series 2005-SN1A Cl. A3A
4.10%, 6/15/08 465 459,987
Capital One Prime Auto
Receivables Trust
Series 2005-1 Cl. A3
4.32%, 8/15/09 720 711,044
Citifinancial Mortgage
Securities, Inc.
Series 2003-1 Cl. AFPT
3.36%, 1/25/33 (e) 116 102,732
Credit-Based Asset Servicing
and Securities
Series 2003-CB1 Cl. AF2
3.45%, 1/25/33 (e) 252 235,990
Series 2005-CB7 Cl. AF2
5.146%, 11/25/35 (e) 260 256,300
6
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------
Dunkin Securitization
Series 2006-1 Cl. A2
5.779%, 6/20/31 (b) $ 100 $ 99,188
GE-WMC Mortgage Securities
LLC
Series 2005-2 Cl. A2B
5.493%, 12/25/35 (a) 285 285,242
Home Equity Mortgage Trust
Series 2005-2 Cl. A1
5.503%, 7/25/35 (a) 84 83,985
Series 2005-4 Cl. A3
4.742%, 1/25/36 (e) 305 299,144
Series 2006-1 Cl. A2
5.30%, 3/25/36 (e) 120 118,436
HFC Home Equity Loan Asset
Backed Certificates
Series 2005-3 Cl. A1
5.527%, 1/20/35 (a) 282 282,400
Novastar Home Equity Loan
Series 2001-1 A1
5.883%, 7/25/31 (a) 164 163,561
Providian Gateway Master Trust
Series 2004-DA Cl. A
3.35%, 9/15/11 (b) 360 350,352
Residential Asset Mortgage
Products, Inc.
Series 2005-RS1 Cl. AII1
5.433%, 1/25/35 (a) 59 59,048
Series 2005-RS3 Cl. AIA2
5.493%, 3/25/35 (a) 290 290,090
Series 2005-RZ1 Cl. A2
5.523%, 4/25/35 (a) 385 385,481
Residential Asset Securities Corp.
Series 2002-KS7 Cl. A2
5.693%, 11/25/32 (a) 85 85,153
Residential Funding Mortgage
Sec II
Series 2005-HI2 Cl. A3
4.46%, 5/25/35 225 219,481
Saxon Asset Securities Trust
Series 2005-4 Cl. A2B
5.503%, 11/25/37 (a) 300 300,048
Specialty Underwriting &
Residential Finance
Series 2006-BC1 Cl. A2A
5.403%, 12/25/36 (a) 238 237,494
Structured Asset Investment
Loan Trust
Series 2006-1 Cl. A1
5.403%, 1/25/36 (a) 203 202,979
-------------
Total Asset-Backed Securities
(cost $5,641,612) 5,586,412
-------------
NON-AGENCY
COLLATERALIZED
MORTGAGE
OBLIGATIONS-4.7%
Bear Stearns ALT-A Trust
Series 2005-10 Cl. 24A1
5.972%, 1/25/36 (c) 434 433,014
Series 2006-1 Cl. 22A1
5.439%, 2/25/36 (c) 584 575,937
Series 2006-2 Cl. 23A1
6.00%, 3/25/36 (c) 463 461,920
Series 2006-3 Cl. 22A1
6.25%, 5/25/36 (c) 246 246,506
Citigroup Mortgage Loan
Trust, Inc.
Series 2005-2 Cl. 1A4
5.122%, 5/25/35 (c) 550 536,382
Series 2006-AR1 Cl. 3A1
5.50%, 3/25/36 (a) 687 677,567
Indymac Index Mortgage
Loan Trust
Series 2006-AR7 Cl. 4A1
6.265%, 5/25/36 (c) 296 295,829
Merrill Lynch Mortgage
Investors, Inc.
Series 2006-A1 Cl. 2A1
6.233%, 3/25/36 (c) 443 443,426
Residential Funding Mortgage
Security 1
Series 2005-SA3 Cl. 3A
5.247%, 8/25/35 (c) 366 359,268
Structured Adjustable Rate
Mortgage Loan
Series 2006-3 Cl. 2A1
6.017%, 4/25/36 (c) 375 374,321
Washington Mutual
Series 2005-AR2 Cl. 2A22
5.543%, 1/25/45 (a) 195 194,824
-------------
Total Non-Agency
Collateralized Mortgage
Obligations
(cost $4,639,646) 4,598,994
-------------
SOVEREIGN DEBT
OBLIGATIONS-2.0%
Russian Federation (Russia)
5.00%, 3/31/30 (e) 920 979,156
United Mexican States (Mexico)
5.625%, 1/15/17 530 492,900
7.50%, 1/14/12 425 450,500
-------------
Total Sovereign Debt Obligations
(cost $1,907,936) 1,922,556
-------------
7
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- ------------------------------------------------------------
COLLATERALIZED
MORTGAGE
OBLIGATIONS-1.1%
Fannie Mae Grantor Trust
Series 2004-T5 Cl. AB4
5.708%, 5/28/35 (a) $ 235 $ 235,451
Freddie Mac Reference Remic
Series R007 Cl. AC
5.875%, 5/15/16 847 842,194
-------------
Total Federal Agency
Collateralized Mortgage
Obligations
(cost $1,081,902) 1,077,645
-------------
SHORT-TERM
INVESTMENTS-22.9%
FEDERAL AGENCIES-21.9%
Federal Home Loan Bank
Discount Note
Zero Coupon, 7/12/06 9,420 9,407,867
Federal Home Mortgage Corp.
Discount Note
Zero Coupon, 7/21/06 6,530 6,513,185
Federal National Mortgage
Association
Zero Coupon, 8/14/06 5,470 5,437,169
-------------
21,358,221
-------------
TIME DEPOSIT-1.0%
The Bank of New York
4.25%, 7/03/06 939 939,000
-------------
Total Short-Term Investments
(cost $22,284,144) 22,297,221
-------------
TOTAL INVESTMENTS-120.0%
(cost $118,759,996) 116,825,419
Other assets less
liabilities-(20.0%) (19,503,741)
-------------
NET ASSETS-100% $ 97,321,678
=============
INTEREST RATE SWAP CONTRACTS (SEE NOTE D)
RATE TYPE
-------------------------
PAYMENTS PAYMENTS
SWAP NOTIONAL TERMINATION MADE BY RECEIVED BY UNREALIZED
COUNTERPARTY AMOUNT DATE THE FUND THE FUND DEPRECIATION
- --------------------------------------------------------------------------------
Lehman Brothers 3,505,000 11/02/07 3 Month LIBOR + 4.814% $(49,790)
Lehman Brothers 1,000,000 3/02/16 3 Month LIBOR + 5.063 (35,539)
+ LIBOR - London Interbank Offered Rate
(a) Floating rate security. Stated rate was in effect at June 30, 2006.
(b) Security is exempt from registration under Rule 144A of the
Securities Act of 1933. These securities are considered liquid and may be
resold in transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 2006, the aggregate market value of these
securities amounted to $2,410,048 or 2.5% of net assets.
(c) Variable rate coupon, rate shown as of June 30, 2006.
(d) The coupon on this security varies along with its rating. For each
rating downgrade by either Moody's or Standard & Poors, the coupon increases by
25 basis points. The coupon decreases by 25 basis points for each upgrade of
its rating. Minimum coupon is 8.125%. The security is currently rated Baa1/A-.
(e) Coupon increases periodically based upon a predetermined schedule.
Stated interest rate in effect at June 30, 2006.
Glossary:
TBA-To Be Assigned-Securities are purchased on a forward commitment with
an approximate principal amount (generally +/-1.0%) and no definite maturity
date. The actual principal amount and maturity date will be determined upon
settlement when the specific mortgage pools are assigned.
See Notes to Financial Statements.
8
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
ASSETS
Investments in securities, at value (cost $118,759,996) $ 116,825,419
Cash 167
Interest receivable 677,873
Receivable for investment securities sold 620,148
-------------
Total assets 118,123,607
-------------
LIABILITIES
Unrealized depreciation of interest rate swap contracts 85,329
Payable for investment securities purchased 20,412,180
Payable for capital stock redeemed 118,715
Advisory fee payable 38,598
Administrative fee payable 19,607
Distribution fee payable 5,098
Transfer agent fee payable 122
Accrued expenses 122,280
-------------
Total liabilities 20,801,929
-------------
NET ASSETS $ 97,321,678
=============
COMPOSITION OF NET ASSETS
Capital stock, at par $ 8,678
Additional paid-in capital 98,492,682
Undistributed net investment income 2,117,052
Accumulated net realized loss on investment transactions (1,276,828)
Net unrealized depreciation of investments (2,019,906)
-------------
$ 97,321,678
=============
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 74,126,502 6,597,576 $ 11.24
B $ 23,195,176 2,080,205 $ 11.15
See Notes to Financial Statements.
9
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
INVESTMENT INCOME
Interest $ 2,568,597
-------------
EXPENSES
Advisory fee 231,966
Distribution fee--Class B 30,038
Transfer agency--Class A 737
Transfer agency--Class B 226
Custodian 71,142
Administrative 39,000
Printing 29,597
Audit 20,248
Legal 3,137
Directors' fees 638
Miscellaneous 4,071
-------------
Total expenses 430,800
-------------
Net investment income 2,137,797
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENT TRANSACTIONS
Net realized loss on:
Investment transactions (835,651)
Swap contracts (6,670)
Net change in unrealized appreciation/depreciation of:
Investments (2,159,149)
Swap contracts (86,497)
-------------
Net loss on investment transactions (3,087,967)
-------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (950,170)
=============
See Notes to Financial Statements.
10
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 2,137,797 $ 3,966,975
Net realized loss on investment transactions (842,321) (344,511)
Net change in unrealized appreciation/depreciation
of investments (2,245,646) (1,396,285)
------------- -------------
Net increase (decrease) in net assets from
operations (950,170) 2,226,179
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income
Class A (3,081,304) (2,754,338)
Class B (907,122) (705,193)
Net realized gain on investment transactions
Class A -0- (2,609,373)
Class B -0- (726,434)
CAPITAL STOCK TRANSACTIONS
Net decrease (5,784,474) (15,673,115)
------------- -------------
Total decrease (10,723,070) (20,242,274)
NET ASSETS
Beginning of period 108,044,748 128,287,022
------------- -------------
End of period (including undistributed net
investment income of $2,117,052 and $3,967,681,
respectively) $ 97,321,678 $ 108,044,748
============= =============
See Notes to Financial Statements.
11
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein U.S. Government/High Grade Securities Portfolio (the
"Portfolio") is a series of AllianceBernstein Variable Products Series Fund,
Inc. (the "Fund"). The Portfolio's investment objective is to seek high current
income consistent with preservation of capital. The Portfolio is diversified as
defined under the Investment Company Act of 1940. The Fund was incorporated in
the State of Maryland on November 17, 1987, as an open-end series investment
company. The Fund offers twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management, L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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.
12
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Portfolio amortizes premiums and accretes discounts as
adjustments to interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various shares
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion,
..40% of the next $2.5 billion and .35% in excess of $5 billion, of the
Portfolio's average daily net assets. Prior to September 7, 2004, the Portfolio
paid the Adviser an advisory fee at an annual rate of .60% of the Portfolio's
average daily net assets. The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
pro-
13
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
viding personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolios to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
------------ ------------
Investment securities (excluding U.S. government
securities) $ 15,611,979 $ 18,651,618
U.S. government securities 173,456,076 177,242,298
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding swap contracts)
are as follows:
Gross unrealized appreciation $ 336,933
Gross unrealized depreciation (2,271,510)
- ------------
Net unrealized depreciation $ (1,934,577)
- ============
1. SWAP AGREEMENTS
The Portfolio may enter into swaps to hedge its exposure to interest rates and
credit risk or for investment purposes. 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.
Risks may arise as a result of the failure of the counterparty to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest 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 contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
In accordance with Financial Accounting Standards Board Statement No. 133, the
Portfolio accrues for the interim payments on swap contracts on a daily basis,
with the net amount recorded within unrealized appreciation/depreciation of
swap contracts on the statement of assets and liabilities. Once the interim
payments are settled in cash, the net amount is
14
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
recorded as realized gain/loss on swaps, in addition to realized gain/loss
recorded upon the termination of swap contracts on the statement of operations.
Fluctuations in the value of swap contracts are recorded as a compontent of net
change in unrealized appreciation/depreciation of investments.
2. DOLLAR ROLLS
The Portfolio may enter into dollar rolls. Dollar rolls involve sales by the
Portfolio of securities for delivery in the current month and the Portfolio's
simultaneously contracting to repurchase substantially similar (same type and
coupon) securities on a specified future date. During the roll period, the
Portfolio forgoes principal and interest paid on the securities. The Portfolio
is compensated by the difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") as well
as by the interest earned on the cash proceeds of the initial sale. Dollar
rolls involve the risk that the market value of the securities the Portfolio is
obligated to repurchase under the agreement may decline below the repurchase
price. Dollar rolls are speculative techniques and may be considered to be
borrowings by the Portfolio.
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
---------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
---------------- ------------ ---------------- -------------
CLASS A
Shares sold 402,373 372,822 $ 4,703,570 $ 4,471,948
Shares issued in reinvestment
of dividends and distributions 273,408 453,782 3,081,304 5,363,710
Shares redeemed (1,126,984) (2,125,694) (13,195,643) (25,485,309)
Net decrease (451,203) (1,299,090) $ (5,410,769) $ (15,649,651)
CLASS B
Shares sold 208,219 449,657 $ 2,432,648 $ 5,373,478
Shares issued in reinvestment
of dividends and distributions 81,065 122,049 907,122 1,431,628
Shares redeemed (318,368) (575,530) (3,713,475) (6,828,570)
Net decrease (29,084) (3,824) $ (373,705) $ (23,464)
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
15
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
----------- -----------
Distributions paid from:
Ordinary income $ 5,187,497 $ 6,121,986
Net long-term capital gains 1,607,841 1,546,494
----------- -----------
Total taxable distributions 6,795,338 7,668,480
----------- -----------
Total distributions paid $ 6,795,338 $ 7,668,480
=========== ===========
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 3,970,863
Accumulated capital and other losses (389,872)(a)
Unrealized appreciation/(depreciation) 177,923(b)
-----------
Total accumulated earnings/(deficit) $ 3,758,914
===========
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$13,456, all of which expires in the year 2013. To the extent future capital
gains are offset by capital loss carryforwards, such gains will not be
distributed. For the year ended December 31, 2005, the Portfolio deferred to
January 1, 2006, post October capital losses of $376,416.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the recognition for tax purposes of gains/losses on
certain derivative instruments.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some
of the AllianceBernstein long-term, open-end retail funds until December 31,
2008; and
16
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
17
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
18
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 -------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.82 $ 12.28 $ 12.56 $ 12.54 $ 12.00 $ 11.68
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .25 .41 .32(c) .26 .42 .57
Net realized and unrealized gain (loss)
on investment transactions (.35) (.17) .12 .23 .49 .33
Net increase (decrease) in net asset
value from operations (.10) .24 .44 .49 .91 .90
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income (.48) (.36) (.36) (.37) (.37) (.58)
Distributions from net realized gain on
investment transactions -0- (.34) (.36) (.10) -0- -0-
Total dividends and distributions (.48) (.70) (.72) (.47) (.37) (.58)
Net asset value, end of period $ 11.24 $ 11.82 $ 12.28 $ 12.56 $ 12.54 $ 12.00
TOTAL RETURN
Total investment return based on net
asset value (d) (.83)% 1.98% 3.77% 3.88% 7.79% 7.88%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $74,127 $83,329 $102,543 $129,194 $164,265 $104,635
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .76%(e)(f) .71% .68% .77% .82% .89%
Expenses, before waivers and
reimbursements .76%(e)(f) .71% .78% .77% .82% .89%
Net investment income 4.22%(e)(f) 3.37% 2.46%(c) 2.10% 3.49% 4.86%
Portfolio turnover rate 188% 529% 662% 748% 551% 259%
See footnote summary on page 20.
19
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(continued)
AllianceBernstein Variable Products Series Fund
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
-----------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 -------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001(a)
-----------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.72 $ 12.18 $ 12.47 $ 12.47 $ 11.94 $ 11.64
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (B) .23 .38 .28(C) .24 .39 .55
Net realized and unrealized gain (loss) on
investment transactions (.35) (.17) .13 .21 .49 .31
Net increase (decrease) in net asset
value from operations (.12) .21 .41 .45 .88 .86
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income. (.45) (.33) (.34) (.35) (.35) (.56)
Distributions from net realized gain on
investment transactions -0- (.34) (.36) (.10) -0- -0-
Total dividends and distributions (.45) (.67) (.70) (.45) (.35) (.56)
Net asset value, end of period $ 11.15 $ 11.72 $ 12.18 $ 12.47 $ 12.47 $ 11.94
TOTAL RETURN
Total investment return based on net
asset value (d) (1.03)% 1.75% 3.52% 3.61% 7.54% 7.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $23,195 $24,716 $25,744 $21,982 $10,602 $7,031
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.01%(e)(f) .96% .93% 1.03% 1.07% 1.14%
Expenses, before waivers and
reimbursements 1.01%(e)(f) .96% 1.03% 1.03% 1.07% 1.14%
Net investment income 3.98%(e)(f) 3.14% 2.19%(c) 1.89% 3.25% 4.61%
Portfolio turnover rate 188% 529% 662% 748% 551% 259%
(a) As required, effective January 1, 2001, the Portfolio has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities. For the year ended
December 31, 2001, the effect of this change to Class A and Class B shares was
to decrease net investment income per share by $.03 and $.03, increase net
realized and unrealized gain on investments per share by $.03 and $.03, and
decrease the ratio of net investment income to average net assets from 5.11% to
4.86% and 4.86% to 4.61%, respectively.
(b) Based on average shares outstanding.
(c) Net of expenses reimbursed or waived by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
20
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE
SECURITIES PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein U.S. Government / High Grade Securities Portfolio (the
"Fund"), prepared by Philip L. Kirstein, the Senior Officer, for the
independent directors of the Fund, as required by an August 2004 agreement
between the Adviser and the New York State Attorney General. The Senior
Officer's evaluation of the investment advisory agreement is not meant to
diminish the responsibility or authority of the Board of Directors of the Fund
to perform its duties pursuant to Section 15 of the Investment Company Act of
1940 (the "40 Act") and applicable state law. The purpose of the summary is to
provide shareholders with a synopsis of the independent evaluation of the
reasonableness of the advisory fees which was provided to the independent
directors in connection with their review of the proposed continuance of the
investment advisory agreement. The Senior Officer's evaluation considered the
following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Low Risk Income 45 bp on 1st $2.5 billion U.S. Government/High Grade
40 bp on next $2.5 billion Securities Portfolio
35 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
U.S. GOVERNMENT/HIGH GRADE $69,000 0.05%
Securities Portfolio
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
21
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
Set forth below are the Fund's latest fiscal year end gross expense ratios.
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
U.S. Government / High Grade Class A 0.78% December 31
Securities Portfolio Class B 1.03%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
U.S. GOVERNMENT / $115.5 U.S. CORE HIGH GRADE 0.269%
High Grade Securities Schedule
Portfolio 40 bp on 1st $20m
25 bp on next $80m
20 bp on next $100m
15 bp on the balance
MINIMUM ACCOUNT SIZE $20M
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund that invests in fixed income
securities:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Fixed Income 0.65%
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
22
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
U.S. Government / High Grade 0.450 0.460 5/13
Securities Portfolio
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(7) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
U.S. Government / High 0.678 0.598 13/19 0.598 9/13
Grade Securities Portfolio
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
(4) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(5) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(6) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(7) Most recent fiscal year end Class A share total expense ratio.
23
_______________________________________________________________________________
U.S. GOVERNMENT/HIGH GRADE SECURITIES PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent
and distribution related services to the Fund and receive transfer agent fees
and Rule 12b-1 payments. Additional information regarding distribution related
fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
U.S. Government / High Grade Securities Portfolio $60,942
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
U.S. Government / High Grade Securities Portfolio $33,488
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(8) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
(8) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
24
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(9) relative to its Lipper Performance Group(10) and Lipper
Performance Universe(11) for the period ended September 30, 2005.
U.S. GOVERNMENT HIGH GRADE SECURITIES PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 11/13 16/19
3 year 11/13 16/19
5 year 11/13 16/19
10 year 12/13 16/19
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(12) versus its benchmark(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH GRADE
SECURITIES PORTFOLIO 2.52 3.63 5.82 5.75 5.70
Lehman Brothers Government
Bond Index 2.47 2.85 6.28 6.34 6.40
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(9) The performance rankings are for the Class A shares of the Fund.
(10) The Lipper Performance Group is identical to the Lipper Expense Group.
(11) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(12) The performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
25
_______________________________________________________________________________
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN MONEY MARKET PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
MONEY MARKET PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this
period.The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds.The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
MONEY MARKET PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $ 1,000 $ 1,018.71 $ 4.96 0.99%
Hypothetical (5%
return before
expenses) $ 1,000 $ 1,019.89 $ 4.96 0.99%
CLASS B
Actual $ 1,000 $ 1,017.43 $ 6.25 1.25%
Hypothetical (5%
return before
expenses) $ 1,000 $ 1,018.60 $ 6.26 1.25%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
CORPORATE OBLIGATIONS-3.7%
CC USA, Inc.
4.963%, 1/10/07(a)(b) $1,200 $ 1,200,000
Sigma Finance, Inc.
5.17%, 7/25/06(a)(b) 1,200 1,200,066
Total Corporate Obligations
(amortized cost $2,400,066) 2,400,066
COMMERCIAL PAPER-79.1%
Allied Irish Banks Plc
5.01%, 7/05/06 700 699,805
Bank of America
5.325%, 8/25/06 2,600 2,579,617
Banque Caisse D'Epargne L'Etat
5.00%, 7/07/06 2,100 2,098,833
Barclays Bank Plc
5.045%, 7/13/06 2,500 2,496,497
Bear Stearns Co., Inc.
5.02%, 7/11/06 700 699,219
Caisse Nationale Des Caisses
4.95%, 7/17/06 900 898,267
Citigroup Funding, Inc.
4.95%, 7/12/06 2,000 1,997,525
Clipper Receivables Corp.
5.11%, 7/10/06 1,100 1,098,905
Danske Corp.
5.20%, 7/21/06 1,100 1,097,140
Depfa Bank Europe Plc
5.035%, 7/17/06 900 898,238
Dexia Delaware LLC
4.865%, 7/03/06 900 900,000
Falcon Asset Securitization
5.30%, 8/24/06 2,500 2,480,861
Fountain Square Funding
5.25%, 8/16/06 2,600 2,583,317
Galaxy Funding
5.01%, 7/06/06 2,200 2,199,082
General Electric Capital Corp.
5.03%, 7/13/06 2,500 2,496,507
HBOS Treasury Services
5.23%, 9/15/06 2,500 2,473,124
HSBC USA, Inc.
4.935%, 8/02/06 2,200 2,190,953
ING Funding LLC
5.29%, 8/23/06 1,100 1,091,756
Lloyds Bank Plc
5.21%, 7/26/06 2,500 2,491,678
Merrill Lynch & Co.
5.20%, 7/18/06 $1,100 1,097,617
MetLife, Inc.
5.09%, 7/25/06 1,100 1,096,578
Network Rail
5.20%, 7/31/06 2,600 2,589,484
Prudential Plc
4.89%, 7/05/06 2,200 2,199,402
Rabobank USA Finance Corp.
5.25%, 7/03/06 2,500 2,500,000
San Paolo
5.165%, 8/15/06 900 894,448
Santander Centro Hispanico
5.02%, 7/14/06 900 898,619
Societe Generale
4.895%, 7/24/06 900 897,430
Svenska Handelsbank, Inc.
4.885%, 7/06/06 1,000 999,593
Triple A One Funding Corp.
5.10%, 7/10/06 1,100 1,098,909
UBS Finance
5.265%, 7/07/06 2,300 2,298,655
Windmill Funding Corp.
5.23%, 7/14/06 1,100 1,098,242
Total Commercial Paper
(amortized cost $51,140,301) 51,140,301
CERTIFICATES OF DEPOSIT-17.5%
American Express Co.
5.26%, 7/25/06 1,100 1,100,000
Calyon NY
5.315%, 8/21/06 2,500 2,500,000
Canadian Imperial Bank
5.33%, 9/13/06 1,100 1,100,000
Norinchukin Bank
4.98%, 7/03/06 800 800,000
Royal Bank of Scotland
4.755%, 1/12/07 1,600 1,600,041
Suntrust Bank
4.62%, 7/31/06 1,000 1,000,000
Toronto Dominion Bank
5.40%, 8/28/06 1,100 1,100,000
Union Bank of California
5.23%, 7/20/06 900 900,000
Wachovia Bank NA
5.459%, 3/30/07 (b) 1,200 1,200,012
Total Certificates of Deposit
(amortized cost $11,300,053) 11,300,053
2
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
U.S. $ Value
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS-100.3%
(cost $64,840,420) $64,840,420
Other assets less liabilities-(0.3%) (183,031)
NET ASSETS-100% $64,657,389
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $2,400,066 or 3.7% of net assets.
(b) Variable rate coupon, rate shown as of June 30, 2006.
See Notes to Financial Statements.
3
MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $64,840,420) $64,840,420
Cash 50,805
Receivable for capital stock sold 127,711
Interest receivable 107,249
Total assets 65,126,185
LIABILITIES
Dividends payable 224,377
Payable for capital stock redeemed 130,460
Custodian fee payable 35,170
Advisory fee payable 25,015
Administrative fee payable 19,607
Distribution fee payable 6,007
Transfer agent fee payable 58
Accrued expenses 28,102
Total liabilities 468,796
NET ASSETS $64,657,389
COMPOSITION OF NET ASSETS
Capital stock, at par $64,658
Additional paid-in capital 64,593,189
Accumulated net realized loss on investment transactions (458)
$64,657,389
NET ASSET VALUE PER SHARE--2 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $35,651,615 35,650,455 $1.00
B $29,005,774 29,008,011 $1.00
See Notes to Financial Statements.
4
MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Interest $1,352,629
EXPENSES
Advisory fee 127,434
Distribution fee--Class B 30,670
Transfer agency--Class A 676
Transfer agency--Class B 517
Custodian 77,064
Administrative 39,000
Audit 20,248
Printing 14,762
Legal 3,640
Directors' fees 547
Miscellaneous 1,871
Total expenses 316,429
Net investment income 1,036,200
REALIZED GAIN ON INVESTMENT TRANSACTIONS
Net realized gain on investment transactions 1
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,036,201
See Notes to Financial Statements.
5
MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,036,200 $ 1,393,653
Net realized gain (loss) on investment
transactions 1 (209)
Net increase in net assets from
operations 1,036,201 1,393,444
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A (605,033) (851,086)
Class B (431,167) (542,837)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 8,509,441 (8,878,786)
Total increase (decrease) 8,509,442 (8,879,265)
NET ASSETS
Beginning of period 56,147,947 65,027,212
End of period (including undistributed
net investment income of $0 and $0,
respectively) $64,657,389 $56,147,947
See Notes to Financial Statements.
6
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Money Market Portfolio (the "Portfolio") is a series of
AllianceBernstein Variable Products Series Fund, Inc. (the "Fund"). The
Portfolio's investment objective is to seek safety of principal, excellent
liquidity and maximum current income to the extent consistent with the first
two objectives. The Portfolio is diversified as defined under the Investment
Company Act of 1940. The Fund was incorporated in the State of Maryland on
November 17, 1987, as an open-end series investment company. The Fund offers
twenty-three 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. The following is a summary of
significant accounting policies followed by the Portfolio.
1. SECURITY VALUATION
Securities in which the Portfolio invests are valued at amortized cost which
approximates fair value, under which method a portfolio instrument is valued at
cost and any premium or discount is amortized on a constant basis to maturity.
2. 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.
3. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Investment transactions are accounted for on
the date securities are purchased or sold. Investment gains and losses are
determined on the identified cost basis. The Portfolio amortizes premiums and
accretes discounts as adjustments to interest income.
4. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
5. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares dividends daily from net investment income. The
dividends are paid monthly. Net realized gains distributions, if any, will be
made at least annually. Income dividends and capital gains distributions to
shareholders are recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .45% of the first $2.5 billion,
..40% of the next $2.5 billion and .35% in excess of $5 billion, of the
Portfolio's average daily net assets. Prior to September 7, 2004, the Portfolio
paid AllianceBernstein L.P. (prior to February 24, 2006 known
7
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
as Alliance Capital Management L.P.) (the "Adviser") an advisory fee at an
annual rate of .50% of the Portfolio's average daily net assets. The fee is
accrued daily and paid monthly.
Pursuant to the advisory agreement, the Portfolio paid $39,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Portfolio by the Adviser for the six months ended June 30, 2006.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
At June 30, 2006, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes.
NOTE E: CAPITAL STOCK
Each class consists of 1,000,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares sold 19,888,846 29,869,578 $19,888,846 $29,869,578
Shares issued in
reinvestment
of dividends 605,033 851,086 605,033 851,086
Shares redeemed (15,211,940) (37,090,427) (15,211,940) (37,090,427)
Net increase
(decrease) 5,281,939 (6,369,763) $5,281,939 $(6,369,763)
CLASS B
Shares sold 18,388,844 26,874,134 $18,388,844 $26,874,134
Shares issued in
reinvestment
of dividends 431,167 542,837 431,167 542,837
Shares redeemed (15,592,509) (29,925,994) (15,592,509) (29,925,994)
Net increase
(decrease) 3,227,502 (2,509,023) $3,227,502 $(2,509,023)
8
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Interest Rate Risk and Credit Risk--The Portfolio's primary risks are interest
rate risk and credit risk. Because the Portfolio invests in short-term
securities, a decline in interest rates will affect the Portfolio's yield as
the securities mature or are sold and the Portfolio purchases new short-term
securities with a lower yield. Generally, an increase in interest rates causes
the value of a debt instrument to decrease. The change in value for
shorter-term securities is usually smaller than for securities with longer
maturities. Because the Portfolio invests in securities with short maturities
and seek to maintain stable net asset value of $1.00 per share, it is possible,
though unlikely, that an increase in interest rates would change the value of
your investment.
Credit risk is the possibility that a security's credit rating will be
downgraded or that the issuer of the security will default (fail to make
scheduled interest and principal payments). The Portfolio's invests in
highly-rated securities to minimize credit risk.
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.
NOTE G: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
------------ ----------
Distributions paid from:
Ordinary income $1,393,923 $498,650
Total distributions paid $1,393,923 $498,650
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $(459)(a)
Total accumulated earnings/(deficit) $(459)
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$459, of which $250 expires in the year 2012, and $209 which expires in 2013.
To the extent future capital gains are offset by capital loss carryforwards,
such gains will not be distributed.
NOTE H: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
9
MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
10
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAG Order. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
11
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 ---------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .02 .02 .01(a) .01 .01 .04
LESS: DIVIDENDS
Dividends from net investment income (.02) (.02) (.01) (.01) (.01) (.04)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on net
asset value (b) 1.87% 2.35% .71% .53% 1.10% 3.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $35,651 $30,370 $36,740 $54,847 $97,216 $128,700
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements .99%(c)(d) .93% .69% .66% .68% .63%
Expenses, before waivers and
reimbursements .99%(c)(d) .93% .73% .66% .68% .63%
Net investment income 3.78%(c)(d) 2.30% .68%(a) .55% 1.10% 3.55%
See footnote summary on page 13.
12
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
--------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2006 -----------------------------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .02 .02 -0-(a)(e) -0-(e) .01 .03
LESS: DIVIDENDS
Dividends from net investment income (.02) (.02) -0-(e) -0-(e) (.01) (.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN
Total investment return based on net
asset value (b) 1.74% 2.10% .46% .28% .85% 3.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $29,006 $25,778 $28,287 $47,946 $52,316 $49,161
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.25%(c)(d) 1.19% .94% .91% .93% .90%
Expenses, before waivers and
reimbursements 1.25%(c)(d) 1.19% .98% .91% .93% .90%
Net investment income 3.53%(c)(d) 2.06% .41%(a) .29% .85% 2.60%
(a) Net of expenses reimbursed or waived by the Adviser.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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.
(c) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(d) Annualized.
(e) Amount is less than $.01 per share.
13
MONEY MARKET PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Money Market Portfolio (the "Fund"), prepared by Philip L.
Kirstein, the Senior Officer, for the independent directors of the Fund, as
required by an August 2004 agreement between the Adviser and the New York State
Attorney General. The Senior Officer's evaluation of the investment advisory
agreement is not meant to diminish the responsibility or authority of the Board
of Directors of the Fund to perform its duties pursuant to Section 15 of the
Investment Company Act of 1940 (the "40 Act") and applicable state law. The
purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying
such services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Low Risk Income 45 bp on 1st $2.5 billion Money Market Portfolio
40 bp on next $2.5 billion
35 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
Money Market Portfolio $69,000 0.08%
Set forth below are the Fund's latest fiscal year end gross expense ratios.
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
14
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
FUND GROSS EXPENSE RATIO FISCAL YEAR
- -------------------------------------------------------------------------------
Money Market Portfolio Class A 0.73% December 31
Class B 0.98%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The AllianceBernstein Exchange Reserves Fund, which the Adviser manages, has a
similar investment style as the Fund. Set forth below is the advisory fee
schedule of the fund:
ADVISORY FEE BASED ON % OF
FUND AVERAGE DAILY NET ASSETS
- -------------------------------------------------------------------------------
Real Estate Investment Portfolio First $1.25 billion 0.25%
Next $0.25 billion 0.24%
Next $0.25 billion 0.23%
Next $0.25 billion 0.22%
Next $1.0 billion 0.21%
Excess of $3.0 billion 0.20%
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund that invests in fixed income
securities:
ASSET CLASS FEE(3)
- -------------------------------------------------------------------------------
Fixed Income 0.65%
(3) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
15
MONEY MARKET PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(4)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Money Market Portfolio 0.450 0.483 5/13
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(5) and Lipper Expense Universe(6). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(7) MEDIAN (%) RANK MEDIAN (%) RANK
- ---------------------------------------------------------------------------------------
Money Market Portfolio 0.692 0.531 51/54 0.549 13/13
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser's profitability from providing investment advisory
services to the Fund decreased during calendar 2004 relative to 2003 primarily
as a result of the reduction of fees in the advisory fee schedule implemented
early in 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the eval-
(4) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(5) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(6) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(7) Most recent fiscal year end Class A share total expense ratio.
16
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
uation of the total relationship between the Fund and the Adviser. Neither case
law nor common business practice precludes the Adviser's affiliates from
earning a reasonable profit on this type of relationship. These affiliates
provide transfer agent and distribution related services to the Fund and
receive transfer agent fees and Rule 12b-1 payments. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Money Market Portfolio $102,508
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Money Market Portfolio $214,300
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(8) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
(8) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
17
MONEY MARKET PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The information prepared by Lipper showed the 1, 3, 5 and 10 year performance
rankings of the Fund(9) relative to its Lipper Performance Group(10) and Lipper
Performance Universe(11) for the period ended September 30, 2005.
MONEY MARKET PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 13/13 53/54
3 year 13/13 53/54
5 year 12/12 50/53
10 year 10/10 47/50
Set forth below are the 1, 3, 5, 10 year and since inception performance
returns of the Fund (in bold)(12) versus the Lipper Variable Money Market
Average(13).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- --------------------------------------------------------------------------------------
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR SINCE INCEPTION
- --------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO 1.85 1.01 1.79 3.38 3.37
Lipper Variable Money Market 2.17 1.19 1.99 3.60 3.69
Average/ # of funds
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(9) The performance rankings are for the Class A shares of the Fund.
(10) The Lipper Performance Group is identical to the Lipper Expense Group.
(11) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(12) The performance returns are for the Class A shares of the Fund.
(13) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
18
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN U.S. LARGE CAP BLENDED STYLE PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's web site at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
U.S. LARGE CAP ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
BLENDED STYLE JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- -----------------------------------------------------------------------------------------------------
CLASS A
Actual $ 1,000 $ 988.06 $ 5.87 1.19%
Hypothetical (5%
return before
expenses) $ 1,000 $1,018.89 $ 5.96 1.19%
CLASS B
Actual $ 1,000 $ 987.17 $ 7.10 1.44%
Hypothetical (5%
return before
expenses) $ 1,000 $1,017.65 $ 7.20 1.44%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------
Exxon Mobil Corp. $ 490,799 3.1%
The Procter & Gamble Co. 419,779 2.7
JPMorgan Chase & Co. 417,899 2.7
WellPoint, Inc. 398,415 2.5
Google, Inc. Cl. A 398,363 2.5
Citigroup, Inc. 371,447 2.4
The Boeing Co. 364,500 2.3
Apple Computer, Inc. 354,143 2.2
Halliburton Co. 352,498 2.2
American International Group, Inc. 310,012 2.0
----------- ------
$ 3,877,855 24.6%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------
Finance $ 3,973,085 25.2%
Health Care 2,269,930 14.4
Consumer Services 2,090,713 13.3
Technology 1,985,733 12.6
Energy 1,824,309 11.6
Consumer Staples 1,248,480 7.9
Utilities 627,460 4.0
Aerospace & Defense 518,314 3.3
Capital Goods 389,565 2.5
Consumer Manufacturing 196,635 1.2
Basic Industry 157,477 1.0
Transportation 142,914 0.9
Multi-Industry Companies 102,864 0.6
----------- ------
Total Investments* 15,527,479 98.5
Cash and receivables, net of liabilities 232,729 1.5
----------- ------
Net Assets $15,760,208 100.0%
* Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-98.5%
FINANCE-25.2%
BANKING - MONEY CENTER-4.1%
JPMorgan Chase & Co. 9,950 $ 417,899
UBS AG 1,500 164,550
Wachovia Corp. 1,300 70,304
------------
652,753
BANKING-REGIONAL-4.7%
Bank of America Corp. 6,400 307,839
Comerica, Inc. 900 46,791
Huntington Bancshares, Inc. 2,000 47,160
KeyCorp 600 21,408
Mellon Financial Corp. 2,000 68,860
National City Corp. 2,000 72,380
Northern Trust Corp. 1,100 60,830
PNC Financial Services Group 400 28,068
Wells Fargo & Co. 1,400 93,912
------------
747,248
BROKERAGE & MONEY MANAGEMENT-6.0%
Federated Investors, Inc. 1,000 31,500
Franklin Resources, Inc. 1,950 169,280
Legg Mason, Inc. 2,100 208,992
Lehman Brothers Holdings, Inc. 550 35,833
Merrill Lynch & Co., Inc. 3,950 274,762
Morgan Stanley 500 31,605
The Goldman Sachs Group, Inc. 1,150 172,995
Waddell & Reed Financial, Inc. 1,000 20,560
------------
945,527
INSURANCE-5.4%
Ace Ltd. 450 22,766
American International Group, Inc. 5,250 310,012
Genworth Financial, Inc. 1,700 59,228
MetLife, Inc. 1,500 76,815
RenaissanceRe Holdings Ltd. 800 38,768
The Allstate Corp. 250 13,683
The Chubb Corp. 1,400 69,860
The Hartford Financial Services Group, Inc. 900 76,140
The St. Paul Travelers Cos., Inc. 2,000 89,160
Torchmark Corp. 600 36,432
UnumProvident Corp. 1,100 19,943
XL Capital Ltd. 600 36,780
------------
849,587
MORTGAGE BANKING-1.4%
Fannie Mae 2,000 96,200
Freddie Mac 1,525 86,940
Regions Financial Corp. 1,100 36,432
------------
219,572
MISCELLANEOUS-3.6%
Citigroup, Inc. 7,700 371,447
MBIA, Inc. 500 29,275
Nasdaq Stock Market, Inc. (a) 1,800 53,820
NYSE Group, Inc. (a) 750 51,360
U.S. Bancorp 1,700 52,496
------------
558,398
------------
3,973,085
HEALTH CARE-14.4%
BIOTECHNOLOGY-3.9%
Amgen, Inc. (a) 400 26,092
Genentech, Inc. (a) 3,675 300,614
Gilead Sciences, Inc. (a) 2,650 156,774
Monsanto Co. 1,550 130,495
------------
613,975
DRUGS-4.0%
Eli Lilly & Co. 800 44,216
Merck & Co., Inc. 3,600 131,148
Pfizer, Inc. 11,000 258,170
Teva Pharmaceutical Industries Ltd. (ADR) 6,550 206,915
------------
640,449
MEDICAL PRODUCTS-1.4%
Alcon, Inc. 2,200 216,810
MEDICAL SERVICES-5.1%
Caremark Rx, Inc. 3,825 190,753
Medco Health Solutions, Inc. (a) 1,025 58,712
Tenet Healthcare Corp. (a) 2,200 15,356
UnitedHealth Group, Inc. 3,025 135,460
WellPoint, Inc. (a) 5,475 398,415
------------
798,696
------------
2,269,930
CONSUMER SERVICES-13.3%
APPAREL-0.3%
Jones Apparel Group, Inc. 1,500 47,685
BROADCASTING & CABLE-1.8%
CBS Corp. Cl. B 2,375 64,244
Comcast Corp. Special Cl. A (a) 2,800 91,784
Time Warner, Inc. 6,600 114,180
Viacom, Inc. Cl. B (a) 175 6,272
------------
276,480
3
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
CELLULAR COMMUNICATIONS-0.6%
America Movil, S.A. de C.V. (ADR) 2,650 $ 88,139
ENTERTAINMENT/LEISURE-0.1%
The Walt Disney Co. 600 18,000
PRINTING & PUBLISHING-0.2%
The Interpublic Group of Cos., Inc. (a) 3,200 26,720
RESTAURANT & LODGING-2.5%
Hilton Hotels Corp. 2,000 56,560
Las Vegas Sands Corp. (a) 950 73,967
McDonald's Corp. 6,400 215,040
Starwood Hotels & Resorts Worldwide, Inc. 750 45,255
------------
390,822
RETAIL - GENERAL MERCHANDISE-3.4%
eBay, Inc. (a) 3,550 103,980
Limited Brands, Inc. 1,900 48,621
Lowe's Cos., Inc. 2,550 154,709
Office Depot, Inc. (a) 1,700 64,600
Target Corp. 3,525 172,267
------------
544,177
TOYS-0.3%
Mattel, Inc. 2,800 46,228
MISCELLANEOUS-4.1%
Google, Inc. Cl. A (a) 950 398,363
Yahoo!, Inc. (a) 7,700 254,099
------------
652,462
------------
2,090,713
TECHNOLOGY-12.6%
COMMUNICATION EQUIPMENT-4.2%
ADC Telecommunications, Inc. (a) 1,300 21,918
Corning, Inc. (a) 9,400 227,386
Crown Castle International Corp. (a) 1,700 58,718
Juniper Networks, Inc. (a) 5,950 95,141
Nokia Oyj (ADR) 600 12,156
QUALCOMM, Inc. 6,225 249,435
------------
664,754
COMMUNICATION SERVICES-0.1%
American Tower Corp. Cl. A (a) 400 12,448
Embarq Corp. (a) 235 9,633
------------
22,081
COMPUTER HARDWARE/STORAGE-3.1%
Apple Computer, Inc. (a) 6,200 354,143
Hewlett-Packard Co. 4,100 129,888
------------
484,031
COMPUTER PERIPHERALS-0.9%
Network Appliance, Inc. (a) 4,100 144,730
COMPUTER SERVICES-0.4%
Electronic Data Systems Corp. 2,700 64,962
CONTRACT MANUFACTURING-0.6%
Cooper Industries Ltd. Cl. A 150 13,938
Flextronics International Ltd. (a) 1,800 19,116
Sanmina-SCI Corp. (a) 3,000 13,800
Solectron Corp. (a) 11,800 40,356
------------
87,210
SEMICONDUCTOR CAPITAL EQUIPMENT-0.2%
Agere Systems, Inc.(a) 2,100 30,870
SEMICONDUCTOR COMPONENTS-2.8%
Advanced Micro Devices, Inc. (a) 7,800 190,476
Broadcom Corp. (a) 7,512 225,736
NVIDIA Corp. (a) 1,250 26,613
------------
442,825
SOFTWARE-0.3%
Microsoft Corp. 1,900 44,270
------------
1,985,733
ENERGY-11.6%
DOMESTIC INTEGRATED-0.1%
Occidental Petroleum Corp. 100 10,255
INTERNATIONAL-4.7%
BP p.l.c. (ADR) 600 41,766
ChevronTexaco Corp. 2,700 167,562
Exxon Mobil Corp. 8,000 490,799
Total, SA (ADR) 700 45,864
------------
745,991
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
OIL SERVICE-6.0%
Baker Hughes, Inc. 875 $ 71,619
ENSCO International, Inc. 1,200 55,224
GlobalSantaFe Corp. 2,950 170,363
Halliburton Co. 4,750 352,498
Nabors Industries Ltd. (a) 3,800 128,402
Noble Corp. 600 44,652
Rowan Cos., Inc. 1,200 42,708
Schlumberger Ltd. 1,300 84,643
------------
950,109
MISCELLANEOUS-0.8%
ConocoPhillips 1,800 117,954
------------
1,824,309
CONSUMER STAPLES-7.9%
BEVERAGES-0.5%
The Coca-Cola Co. 1,975 84,965
FOOD-0.9%
Del Monte Foods Co. 2,000 22,460
General Mills, Inc. 1,200 61,992
Kellogg Co. 1,000 48,430
Kraft Foods, Inc. 275 8,498
------------
141,380
HOUSEHOLD PRODUCTS-3.7%
Colgate-Palmolive Co. 800 47,920
Kimberly-Clark Corp. 1,000 61,700
The Clorox Co. 900 54,873
The Procter & Gamble Co. 7,550 419,779
------------
584,272
RETAIL - FOOD & DRUG-1.6%
Safeway, Inc. 1,600 41,600
SUPERVALU, Inc. 1,100 33,770
The Kroger Co. 3,100 67,766
Walgreen Co. 1,250 56,050
Whole Foods Market, Inc. 800 51,712
------------
250,898
TOBACCO-1.2%
Altria Group, Inc. 2,300 168,889
UST, Inc. 400 18,076
------------
186,965
------------
1,248,480
UTILITIES-4.0%
ELECTRIC & GAS UTILITY-1.1%
Dominion Resources, Inc. 1,000 74,790
Entergy Corp. 900 63,675
Northeast Utilities 1,400 28,938
------------
167,403
TELEPHONE UTILITY-2.9%
AT&T, Inc 2,700 75,303
BellSouth Corp. 3,500 126,700
Sprint Nextel Corp. 4,700 93,953
Verizon Communications, Inc. 4,900 164,101
------------
460,057
------------
627,460
AEROSPACE & DEFENSE-3.3%
AEROSPACE-3.3%
Goodrich Corp. 1,000 40,290
Northrop Grumman Corp. 900 57,654
Rockwell Collins, Inc. 1,000 55,870
The Boeing Co. 4,450 364,500
------------
518,314
CAPITAL GOODS-2.5%
ELECTRICAL EQUIPMENT-0.6%
Arrow Electronics, Inc. (a) 1,200 38,640
Emerson Electric Co. 650 54,477
------------
93,117
MACHINERY-0.6%
Eaton Corp. 700 52,780
Ingersoll-Rand Co., Ltd. 800 34,224
------------
87,004
MISCELLANEOUS-1.3%
General Electric Co. 5,200 171,392
United Technologies Corp. 600 38,052
------------
209,444
------------
389,565
CONSUMER
MANUFACTURING-1.2%
AUTO & RELATED-1.2%
Autoliv, Inc. 1,000 56,569
BorgWarner, Inc. 700 45,570
Magna International, Inc. Cl. A 250 17,993
SPX Corp. 900 50,355
Toyota Motor Corp. (ADR) 250 26,148
------------
196,635
BASIC INDUSTRY-1.0%
CHEMICALS-0.6%
Arkema (ADR) (a) 17 663
PPG Industries, Inc. 900 59,400
The Lubrizol Corp. 700 27,895
------------
87,958
CONTAINERS-0.3%
Crown Holdings, Inc. (a) 1,300 20,241
Owens-Illinois, Inc. (a) 1,700 28,492
------------
48,733
5
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.1%
Smurfit-Stone Container Corp. (a) 1,900 $ 20,786
------------
157,477
TRANSPORTATION-0.9%
RAILROAD-0.9%
CSX Corp. 1,500 105,660
Norfolk Southern Corp. 700 37,254
------------
142,914
MULTI-INDUSTRY COMPANIES-0.6%
Crane Co. 700 29,120
Textron, Inc. 800 73,744
------------
102,864
Total Common Stocks
(cost $13,638,271) 15,527,479
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-1.4%
TIME DEPOSIT-1.4%
The Bank of New York
4.25%, 7/03/06
(cost $218,000) $ 218 $ 218,000
TOTAL INVESTMENTS-99.9%
(cost $13,856,271) 15,745,479
Other assets less liabilities-0.1% 14,729
NET ASSETS-100% $15,760,208
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See Notes to Financial Statements.
6
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $13,856,271) $15,745,479
Cash 3,301
Receivable for investment securities sold 54,625
Receivable for capital stock sold 34,057
Dividends and interest receivable 13,384
Receivable due from Adviser 987
Total assets 15,851,833
LIABILITIES
Payable for investment securities purchased 27,173
Custodian fee payable 24,430
Audit fee payable 21,513
Printing fee payable 5,415
Distribution fee payable 3,407
Transfer agent fee payable 118
Payable for capital stock redeemed 38
Accrued expenses 9,531
Total liabilities 91,625
NET ASSETS $15,760,208
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,288
Additional paid-in capital 13,348,854
Undistributed net investment income 6,461
Accumulated net realized gain on investment transactions 514,397
Net unrealized appreciation of investments 1,889,208
-------------
$15,760,208
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 10,414 841 $12.38
B $15,749,794 1,287,548 $12.23
See Notes to Financial Statements.
7
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $1,332) $ 124,307
Interest 1,787
Total investment income 126,094
EXPENSES
Advisory fee 53,639
Distribution fee--Class B 20,617
Transfer agency--Class B 675
Custodian 58,629
Administrative 39,000
Audit 20,248
Printing 4,569
Directors' fees 639
Legal 447
Miscellaneous 538
Total expenses 199,001
Less: expenses waived and reimbursed by the Adviser
(see Note B) (79,368)
Net expenses 119,633
Net investment income 6,461
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain on investment transactions 544,730
Net change in unrealized appreciation/depreciation
of investments (732,417)
Net loss on investment transactions (187,687)
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (181,226)
See Notes to Financial Statements.
8
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
---------------- ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ 6,461 $ (13,689)
Net realized gain on investment
transactions 544,730 937,920
Net change in unrealized
appreciation/depreciation
of investments (732,417) 597,831
Net increase (decrease) in net assets
from operations (181,226) 1,522,062
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A -0- (5,706)
Class B -0- (43,625)
Net realized gain on investment
transactions
Class A (473) -0-
Class B (719,255) -0-
CAPITAL STOCK TRANSACTIONS
Net decrease (76,790) (1,419,021)
Total increase (decrease) (977,744) 53,710
NET ASSETS
Beginning of period 16,737,952 16,684,242
End of period (including undistributed
net investment income of $6,461 and
$0, respectively) $15,760,208 $16,737,952
See Notes to Financial Statements.
9
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein U.S.Large Cap Blended Style Portfolio (the "Portfolio")
is a series of AllianceBernstein Variable Products Series Fund, Inc. (the
"Fund"). The Portfolio's investment objective is to seek long-term growth of
capital. The Portfolio is diversified as defined under the Investment Company
Act of 1940. The Fund was incorporated in the State of Maryland on November 17,
1987, as an open-end series investment company. The Fund offers twenty-three
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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
7. REPURCHASE AGREEMENTS
It is the policy of the Portfolio that its custodian or designated subcustodian
take control of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of collateral by the
Portfolio may be delayed or limited.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .65% of the first $2.5 billion,
..55% of the next $2.5 billion and .50% in excess of $5 billion, of the
Portfolio's average
11
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
daily net assets. Prior to September 7, 2004, the Portfolio paid the Adviser an
advisory fee at an annual rate of .95% of the first $5 billion, .90% of the
next $2.5 billion, .85% of the next $2.5 billion and .80% of the excess over
$10 billion of the Portfolio's average daily net assets. The fee is accrued
daily and paid monthly. The Adviser has agreed to waive its fees and bear
certain expenses to the extent necessary to limit total operating expenses on
an annual basis to 1.20% and 1.45% of the daily average net assets for Class A
and Class B shares, respectively. For the six months ended June 30, 2006, the
Adviser waived fees in the amount of $40,368.
Pursuant to the terms of the investment advisory agreement, the Portfolio has
agreed to reimburse the Adviser for the cost of providing the Portfolio with
certain legal and accounting services. Due to the Adviser's agreement to limit
total operating expenses as described above, the Adviser waived reimbursement
for such services in the amount of $39,000 for the six months ended June 30,
2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $5,561, of which $8 and $0, respectively, was paid
to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates
of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006 were as follows:
PURCHASES SALES
------------ ------------
Investment securities (excluding U.S.
government securities) $4,121,744 $4,933,154
U.S. government securities -0- -0-
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation are as follows:
Gross unrealized appreciation $2,318,998
Gross unrealized depreciation (429,790)
Net unrealized appreciation $1,889,208
1. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Portfolio has in that particular
currency contract.
2. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
13
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares issued in
reinvestment
of dividends and
distributions 38 482 $ 473 $ 5,706
Shares redeemed -0- (99,788) -0- (1,242,557)
Net increase
(decrease) 38 (99,306) $ 473 $(1,236,851)
CLASS B
Shares sold 75,814 183,494 $ 987,763 $ 2,184,593
Shares issued in
reinvestment
of dividends and
distributions. 59,247 3,716 719,255 43,625
Shares redeemed (134,825) (202,505) (1,784,281) (2,410,388)
Net increase
(decrease) 236 (15,295) $ (77,263) $ (182,170)
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Porfolio did not utilize the Facility during the six months ended June 30, 2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
------- -------
Distributions paid from:
Ordinary income $49,331 $10,102
Total taxable distributions 49,331 10,102
Total distributions paid $49,331 $10,102
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 154,041
Undistributed long-term capital gains 563,282
Unrealized appreciation/(depreciation) 2,593,697(a)
Total accumulated earnings/(deficit) $3,311,020
(a) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
For the year ended December 31, 2005, the Portfolio utilized capital loss
carryforwards of $187,067.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance
15
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
defendants failed to disclose that they improperly allowed certain hedge funds
and other unidentified parties to engage in "late trading" and "market timing"
of AllianceBernstein Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Exchange Act and Sections 206
and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of
compensatory damages and rescission of their contracts with the Adviser,
including recovery of all fees paid to the Adviser pursuant to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
17
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
----------------------------------------------------
SIX MONTHS JUNE 6,
ENDED YEAR ENDED DECEMBER 31, 2003(A) TO
JUNE 30, 2006 ------------------------ DECEMBER 31,
(UNAUDITED) 2005 2004 2003
----------- ----------- ----------- -----------
Net asset value, beginning of period $13.13 $11.98 $10.96 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .02 .02 .06 .03
Net realized and unrealized gain (loss)
on investment transactions (.18) 1.19 .97 .93
Net increase (decrease) in net asset value
from operations (.16) 1.21 1.03 .96
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.06) (.01) -0-
Distributions from net realized gain on
investment transactions (.59) -0- -0- -0-
Total dividends and distributions (.59) (.06) (.01) -0-
Net asset value, end of period $12.38 $13.13 $11.98 $10.96
TOTAL RETURN
Total investment return based on net asset
value (d) (1.19)% 10.13% 9.43% 9.60%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $10 $11 $1,200 $1,096
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.19%(e)(f) 1.19% 1.20% 1.20%(e)
Expenses, before waivers and
reimbursements 2.15%(e)(f) 2.29% 2.67% 6.65%(e)
Net investment income (c) .34%(e)(f) .15% .55% .45%(e)
Portfolio turnover rate 25% 80% 42% 13%
See footnote summary on page 19.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
----------------------------------------------------
SIX MONTHS MAY 2,
ENDED YEAR ENDED DECEMBER 31, 2003(G) TO
JUNE 30, 2006 ------------------------ DECEMBER 31,
(UNAUDITED) 2005 2004 2003
----------- ----------- ----------- -----------
Net asset value, beginning of period $12.99 $11.89 $10.90 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b)(c) .01 (.01) .04 .01
Net realized and unrealized gain (loss)
on investment transactions (.18) 1.14 .96 .89
Net increase (decrease) in net asset value
from operations (.17) 1.13 1.00 .90
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.03) (.01) -0-
Distributions from net realized gain on
investment transactions (.59) -0- -0- -0-
Total dividends and distributions (.59) (.03) (.01) -0-
Net asset value, end of period $12.23 $12.99 $11.89 $10.90
TOTAL RETURN
Total investment return based on net asset
value (d) (1.28)% 9.57% 9.16% 9.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $15,750 $16,727 $15,485 $6,600
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.44%(e)(f) 1.45% 1.45% 1.43%(e)
Expenses, before waivers and
reimbursements 2.40%(e)(f) 2.59% 2.95% 8.25%(e)
Net investment income (loss) (c) .09%(e)(f) (.10)% .37% .27%(e)
Portfolio turnover rate 25% 80% 42% 13%
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Net of expenses waived and reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio distributions or
redemption of Portfolio shares. Total investment return calculated for a period
of less than one year is not annualized.
(e) Annualized.
(f) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(g) Commencement of operations.
19
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein U.S. Large Cap Blended Style Portfolio (the "Fund"), prepared
by Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying
such services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Blend 65 bp on 1st $2.5 billion U.S. Large Cap
55 bp on next $2.5 billion Blended Style Portfolio
50 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A %
OF AVERAGE
FUND AMOUNT DAILY NET ASSETS
- -------------------------------------------------------------------------------
U.S. Large Cap Blended Style Portfolio (3) $69,000 0.53%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
(3) The expense reimbursement has been waived by the Adviser.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's most recent fiscal year. The waiver is terminable by the Adviser on
May 1st of each year upon at least 60 days written notice. The gross expense
ratios of the Fund during the most recently completed fiscal year are also
listed below.
EXPENSE CAP PURSUANT TO
EXPENSE LIMITATION
FUND UNDERTAKING GROSS EXPENSE RATIO FISCAL YEAR END
- ----------------------------------------------------------------------------------------
U.S. Large Cap Blended Class A 1.20% 2.67% December 31
Style Portfolio Class B 1.45% 2.95%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- --------------------------------------------------------------------------------------
U.S. Large Cap Blended $16.1 U.S. Style Blend Schedule 0.800%
Style Portfolio 80 bp on 1st $25 m
60 bp on next $25 m
50 bp on next $50 m
40 bp on next $100 m
30 bp on the balance
MINIMUM ACCOUNT SIZE $50 M
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
21
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(4)
- -------------------------------------------------------------------------------
Equity Blend 0.80%
The Adviser provides sub-advisory investment services to certain other
investment companies managed by other fund families. The Adviser charges the
following fees for each of these sub-advisory relationships:
FUND FEE SCHEDULE
- -------------------------------------------------------------------------------
U.S. Large Cap Blended Client # 1 0.40%
Style Portfolio
Client # 2 0.90% on first $20 million
0.75% on next $20 million
0.60% on next $20 million
0.40% on next $40 million
0.30% on next $100 million
It is fair to note that the services the Adviser provides pursuant to
sub-advisory agreements are generally confined to the services related to the
investment process; in other words, they are not as comprehensive as the
services provided to the Fund by the Adviser.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
U.S. Large Cap Blended Style Portfolio 0.650 0.800 3/13
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper
(4) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the fee waiver or expense reimbursement that effectively
reduce the contractual fee rates. In addition, the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(8) MEDIAN (%) RANK MEDIAN (%) RANK
- ----------------------------------------------------------------------------------------------
U.S. Large Cap Blended
Style Portfolio 1.200 0.859 67/68 1.005 13/13
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser did not earn a profit during calendar 2004 and 2003
primarily as a result of the Adviser having to reimburse the Fund for
additional expenses incurred above the Funds expense cap limitation.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
U.S. Large Cap Blended Style Portfolio $29,594
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
U.S. Large Cap Blended Style Portfolio $292,048
(8) Most recent fiscal year end Class A share total expense ratio.
23
U.S. LARGE CAP BLENDED STYLE PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $859 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1 year performance rankings of
the Fund(10) relative to its Lipper Performance Group(11) and Lipper
Performance Universe(12) for the period ended September 30, 2005.
U.S. LARGE CAP BLENDED STYLE PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 6/13 20/70
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Set forth below are the 1 year and since inception performance returns of the
Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
U.S. LARGE CAP BLENDED STYLE PORTFOLIO 15.81 11.60
S&P 500 Index 12.25 12.82
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
25
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
JUNE 30, 2006
> ALLIANCEBERNSTEIN BALANCED WEALTH STRATEGY PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
> ARE NOT FDIC INSURED
> MAY LOSE VALUE
> ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEIN(R) AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE
MARKS USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
BALANCED WEALTH STRATEGY PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
BALANCED WEALTH STRATEGY PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- ---------------------------------- --------------- ------------- -------------- --------------
CLASS A
Actual $1,000 $1,022.37 $5.21 1.04%
Hypothetical (5% return before expenses) $1,000 $1,019.64 $5.21 1.04%
CLASS B
Actual $1,000 $1,022.10 $6.47 1.29%
Hypothetical (5% return before expenses) $1,000 $1,018.40 $6.46 1.29%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period)
1
BALANCED WEALTH STRATEGY PORTFOLIO
TEN LARGEST HOLDINGS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Federal National Mortgage Assoc.
(Common Stock and Bonds) $ 14,841,975 14.7%
U.S. Treasury Bonds 1,987,009 2.0
U.S. Treasury Notes 1,682,659 1.7
Government of Sweden 1,332,352 1.3
WellPoint, Inc. (Common Stock & Bonds) 1,126,495 1.1
Exxon Mobil Corp. 1,052,152 1.0
The Procter & Gamble Co. 1,035,550 1.0
JPMorgan Chase & Co. (Common Stock & Bonds) 1,016,601 1.0
Google, Inc. Cl.A 974,942 1.0
Citigroup, Inc. (Common Stock & Bonds) 929,265 0.9
------------ -----
$ 25,979,000 25.7%
SECTOR DIVERSIFICATION
JUNE 30, 2006 (UNAUDITED)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Finance $ 18,941,485 18.7%
U.S. Government & Government Sponsored
Agency Obligations 18,902,963 18.7
Construction & Housing 10,250,585 10.1
Technology/Electronics 7,973,218 7.9
Energy 5,504,510 5.4
Medical 5,200,508 5.1
Sovereign Debt Obligations 4,564,258 4.5
Capital Equipment 4,398,060 4.3
Commerical Mortgage Backed Securities 3,913,519 3.9
Consumer Cyclical 3,893,733 3.8
Consumer Staples 3,827,674 3.8
Telecommunications 2,900,985 2.9
Industrial Commodities 2,256,735 2.2
Utilities 1,931,783 1.9
Other* 3,608,310 3.6
------------ -----
Total Investments** 98,068,326 96.8
Cash and receivables, net of liabilities 3,204,930 3.2
------------ -----
Net Assets $101,273,256 100.0%
* The Portfolio's sector diversification is expressed as a percentage of net
assets and may vary over time. "Other" represents the following sectors: Asset
Backed Securities, Industrials and Transportation.
** Excludes short-term investments.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-63.3%
UNITED STATES INVESTMENTS-40.1%
FINANCE-10.7%
BANKING-5.0%
Bank of America Corp. 14,825 $ 713,082
Citigroup, Inc. 17,350 836,964
Comerica, Inc. 2,125 110,479
Fannie Mae 4,800 230,880
Freddie Mac 3,675 209,512
Huntington Bancshares, Inc. 4,000 94,320
JPMorgan Chase & Co. 22,225 933,450
KeyCorp 1,250 44,600
Mellon Financial Corp. 3,000 103,290
National City Corp. 4,175 151,093
Northern Trust Corp. 2,650 146,545
PNC Financial Services Group, Inc. 450 31,576
Regions Financial Corp. 3,700 122,544
SunTrust Banks, Inc. 2,150 163,959
The Bank of New York Company, Inc. 5,000 161,000
U.S. Bancorp 3,500 108,080
UBS AG 3,700 405,890
Wachovia Corp. 5,875 317,720
Wells Fargo & Co. 2,875 192,855
------------
5,077,839
FINANCIAL SERVICES-2.6%
CIT Group, Inc. 2,400 125,496
Countrywide Financial Corp. 1,700 64,736
Federated Investors, Inc. 1,750 55,125
Franklin Resources, Inc. 4,775 414,518
Legg Mason, Inc. 5,175 515,016
Lehman Brothers Holdings, Inc. 1,000 65,150
MBIA, Inc. 1,200 70,260
Merrill Lynch & Co., Inc. 8,750 608,650
Morgan Stanley 1,100 69,531
Nasdaq Stock Market, Inc. (a) 4,050 121,095
NYSE Group, Inc. (a) 1,850 126,688
Prudential Financial, Inc. 200 15,540
The Goldman Sachs Group, Inc. 2,650 398,640
Waddell & Reed Financial, Inc. 1,200 24,672
------------
2,675,117
INSURANCE-3.1%
American International Group, Inc. 14,050 829,652
Genworth Financial, Inc. 3,475 121,069
MetLife, Inc. 2,900 148,509
Old Republic International Corp. 2,200 47,014
The Allstate Corp. 1,600 87,568
The Chubb Corp. 1,800 89,820
The Hartford Financial Services Group, Inc. 1,875 158,625
The St. Paul Travelers Cos., Inc. 4,050 180,549
Torchmark Corp. 1,875 113,850
UnitedHealth Group, Inc. 7,350 329,133
UnumProvident Corp. 3,900 70,707
WellPoint, Inc. (a) 13,350 971,479
------------
3,147,975
------------
10,900,931
TECHNOLOGY/ELECTRONICS-6.4%
DATA PROCESSING-3.8%
Agere Systems, Inc. (a) 2,500 36,750
Apple Computer, Inc. (a) 15,350 876,792
Arrow Electronics, Inc. (a) 950 30,590
Ceridian Corp. (a) 3,300 80,652
Electronic Data Systems Corp. 5,100 122,706
EMC Corp. (a) 6,800 74,596
Google, Inc. Cl. A (a) 2,325 974,942
Hewlett-Packard Co. 7,600 240,768
International Business Machines Corp. 1,925 147,879
Microsoft Corp. 4,050 94,365
Network Appliance, Inc. (a) 10,000 353,000
Sanmina-SCI Corp. (a) 9,400 43,240
Solectron Corp. (a) 19,800 67,716
Tech Data Corp. (a) 1,400 53,634
Yahoo!, Inc. (a) 18,850 622,050
------------
3,819,680
ELECTRICAL & ELECTRONICS-2.1%
ADC Telecommunications, Inc. (a) 1,600 26,976
Broadcom Corp. Cl. A (a) 18,400 552,920
Cisco Systems, Inc. (a) 3,800 74,214
Corning, Inc. (a) 23,400 566,046
Juniper Networks, Inc. (a) 14,650 234,254
QUALCOMM, Inc. 15,200 609,064
Tellabs, Inc. (a) 3,200 42,592
------------
2,106,066
ELECTRONIC COMPONENTS & INSTRUMENTS-0.5%
Advanced Micro Devices, Inc. (a) 19,350 472,527
Nvidia Corp. (a) 3,200 68,128
------------
540,655
------------
6,466,401
3
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
CONSTRUCTION & HOUSING-4.3%
REAL ESTATE-4.3%
Alexandria Real Estate Equities, Inc. 1,850 $ 164,058
AMB Property Corp. 900 45,495
Archstone-Smith Trust 2,500 127,175
AvalonBay Communities, Inc. 1,975 218,474
BioMed Realty Trust, Inc. 900 26,946
Boston Properties, Inc. 2,050 185,320
Brookfield Properties Corp. 2,200 70,774
Camden Property Trust 2,450 180,198
Corporate Office Properties Trust 3,950 166,216
Developers Diversified Realty Corp. 1,550 80,879
Digital Realty Trust, Inc. 4,500 111,105
Equity Inns, Inc. 3,000 49,680
Equity Office Properties Trust 1,800 65,718
Equity Residential 4,300 192,339
Essex Property Trust, Inc. 575 64,205
Federal Realty Investment Trust 1,350 94,500
FelCor Lodging Trust, Inc. 4,200 91,308
First Potomac Realty Trust 1,350 40,216
Forest City Enterprises, Inc. 1,350 67,379
General Growth Properties, Inc. 3,675 165,595
Kimco Realty Corp. 4,500 164,205
LaSalle Hotel Properties 1,150 53,245
Maguire Properties, Inc. 4,000 140,680
Mid-America Apartment Communities, Inc. 1,600 89,200
ProLogis 5,125 267,115
Public Storage, Inc. 2,800 212,520
Reckson Associates Realty Corp. 750 31,035
Regency Centers Corp. 2,000 124,300
Simon Property Group, Inc. 3,775 313,098
SL Green Realty Corp. 1,050 114,944
Strategic Hotel Capital, Inc. 4,400 91,256
Sunstone Hotel Investors, Inc. 3,650 106,069
Tanger Factory Outlet Centers, Inc. 1,900 61,503
Taubman Centers, Inc. 1,800 73,620
The Macerich Co. 475 33,345
United Dominion Realty Trust, Inc. 1,250 35,013
Vornado Realty Trust 2,000 195,100
------------
4,313,828
ENERGY-3.6%
ENERGY EQUIPMENT & SERVICES-1.7%
Baker Hughes, Inc. 2,300 188,255
ENSCO International, Inc. 1,400 64,428
GlobalSantaFe Corp. 5,200 300,300
Halliburton Co. 11,650 864,546
Rowan Cos., Inc. 1,600 56,944
Schlumberger Ltd. 3,050 198,586
------------
1,673,059
ENERGY SOURCES-1.9%
ChevronTexaco Corp. 6,975 432,869
ConocoPhillips 3,200 209,696
Exxon Mobil Corp. 17,150 1,052,152
Marathon Oil Corp. 1,500 124,950
Occidental Petroleum Corp. 1,300 133,315
------------
1,952,982
------------
3,626,041
CONSUMER CYCLICAL-3.4%
BROADCASTING & PUBLISHING-0.9%
CBS Corp. Cl. B 5,200 140,660
Comcast Corp. Cl. A (a) 3,300 108,042
Comcast Corp. Special Cl. A (a) 2,700 88,506
Gannett Co., Inc. 900 50,337
Liberty Media Holding Corp. Capital (a) 260 21,780
Liberty Media Holding Corp. Interactive (a) 1,300 22,438
The Walt Disney Co. 3,400 102,000
Time Warner, Inc. 13,600 235,280
Viacom, Inc. Cl. B (a) 3,300 118,272
------------
887,315
BUSINESS & PUBLIC SERVICES-0.0%
The Interpublic Group of Cos., Inc. (a) 5,500 45,925
LEISURE & TOURISM-1.1%
Hilton Hotels Corp. 4,750 134,330
Host Marriott Corp. 6,329 138,415
Las Vegas Sands Corp. (a) 2,200 171,292
McDonald's Corp. 14,575 489,720
Starwood Hotels & Resorts Worldwide, Inc. 2,125 128,222
------------
1,061,979
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
MERCHANDISING-1.2%
eBay, Inc. (a) 8,650 $ 253,359
Limited Brands 3,650 93,404
Lowe's Cos., Inc. 6,200 376,154
Office Depot, Inc. (a) 3,300 125,400
Target Corp. 7,800 381,186
------------
1,229,503
RECREATION & OTHER CONSUMER-0.1%
Mattel, Inc. 3,900 64,389
TEXTILES & APPAREL-0.1%
Jones Apparel Group, Inc. 2,500 79,475
V.F. Corp. 500 33,960
------------
113,435
MISCELLANEOUS CONSUMER CYCLICALS-0.0%
Newell Rubbermaid, Inc. 1,900 49,077
------------
3,451,623
MEDICAL-3.1%
HEALTH & PERSONAL CARE-3.1%
AmerisourceBergen Corp. 1,700 71,264
Amgen, Inc. (a) 1,000 65,230
Cardinal Health, Inc. 800 51,464
Caremark Rx, Inc. 9,400 468,778
Eli Lilly & Co. 1,550 85,669
Genentech, Inc. (a) 9,050 740,290
Gilead Sciences, Inc. (a) 6,440 380,990
International Flavors & Fragrances, Inc. 1,550 54,622
McKesson Corp. 800 37,824
Medco Health Solutions, Inc. (a) 2,500 143,200
Merck & Co., Inc. 6,975 254,099
Pfizer, Inc. 26,100 612,567
Tenet Healthcare Corp. (a) 2,800 19,544
Ventas, Inc. 2,750 93,170
Wyeth 1,375 61,064
------------
3,139,775
CONSUMER STAPLES-2.7%
BEVERAGES & TOBACCO-0.7%
Altria Group, Inc. 5,050 370,821
Kraft Foods, Inc. 1,300 40,170
PepsiCo, Inc. 1,150 69,046
The Coca-Cola Co. 3,325 143,042
UST, Inc. 1,500 67,785
------------
690,864
FOOD & HOUSEHOLD PRODUCTS-2.0%
Colgate-Palmolive Co. 1,900 113,810
ConAgra Foods, Inc. 4,100 90,651
Del Monte Foods Co. 2,100 23,583
General Mills, Inc. 2,425 125,276
Kellogg Co. 2,200 106,546
Safeway, Inc. 2,700 70,200
SUPERVALU, Inc. 1,500 46,050
The Clorox Co. 1,400 85,358
The Kroger Co. 3,700 80,882
The Procter & Gamble Co. 18,625 1,035,550
Walgreen Co. 3,050 136,762
Whole Foods Market, Inc. 2,100 135,744
------------
2,050,412
------------
2,741,276
CAPITAL EQUIPMENT-2.5%
AEROSPACE & DEFENSE-1.3%
Goodrich Corp. 1,700 68,493
Lockheed Martin Corp. 1,000 71,740
Northrop Grumman Corp. 2,350 150,541
Rockwell Collins, Inc. 2,750 153,642
The Boeing Co. 10,200 835,482
------------
1,279,898
AUTOMOBILES-0.2%
Autoliv, Inc. 1,850 104,655
BorgWarner, Inc. 1,375 89,513
Johnson Controls, Inc. 350 28,777
------------
222,945
INDUSTRIAL COMPONENTS-0.1%
Eaton Corp. 1,000 75,400
MULTI-INDUSTRY-0.9%
Crane Co. 800 33,280
Emerson Electric Co. 1,600 134,096
General Electric Co. 11,950 393,871
Hubbell, Inc. Cl. B 600 28,590
SPX Corp. 1,425 79,729
Textron, Inc. 2,100 193,578
United Technologies Corp. 1,500 95,130
------------
958,274
------------
2,536,517
TELECOMMUNICATIONS-1.3%
American Tower Corp. (a) 1,100 34,232
AT&T, Inc. 14,450 403,010
BellSouth Corp. 6,900 249,780
Crown Castle International Corp. (a) 2,800 96,712
Embarq Corp. (a) 370 15,166
Sprint Corp. (FON Group) 7,400 147,926
Verizon Communications, Inc. 11,450 383,461
------------
1,330,287
5
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
INDUSTRIAL COMMODITIES-0.9%
CHEMICAL-0.5%
E.I. du Pont de Nemours & Co. 1,400 $ 58,240
Monsanto Co. 3,825 322,027
PPG Industries, Inc. 1,575 103,950
The Lubrizol Corp. 1,525 60,771
------------
544,988
FOREST & PAPER-0.2%
Kimberly-Clark Corp. 2,025 124,943
MeadWestvaco Corp. 1,100 30,723
Smurfit-Stone Container Corp. (a) 4,300 47,042
------------
202,708
MISCELLANEOUS MATERIALS-0.2%
Crown Holdings, Inc. (a) 2,300 35,811
Owens-Illinois, Inc. (a) 3,300 55,308
Sonoco Products Co. 2,200 69,630
------------
160,749
------------
908,445
UTILITIES-0.8%
ELECTRIC & GAS UTILITY-0.8%
Allegheny Energy, Inc. (a) 1,800 66,726
American Electric Power Co., Inc. 3,600 123,300
Constellation Energy Group, Inc. 2,200 119,944
Dominion Resources, Inc. 2,125 158,929
Entergy Corp. 1,375 97,281
Northeast Utilities 2,100 43,407
Pinnacle West Capital Corp. 1,800 71,838
Wisconsin Energy Corp. 2,350 94,705
------------
776,130
TRANSPORTATION-0.4%
TRANSPORTATION - ROAD & RAIL-0.4%
CSX Corp. 2,950 207,798
Norfolk Southern Corp. 2,200 117,084
Union Pacific Corp. 1,050 97,608
------------
422,490
Total United States Investments
(cost $37,976,075) 40,613,744
FOREIGN INVESTMENTS-23.2%
AUSTRALIA-1.0%
Centro Properties Group 6,169 30,664
DB RREEF Trust 85,551 93,092
General Property Trust 47,000 151,399
Macquarie CountryWide Trust 21,380 28,899
Macquarie Goodman Group 19,807 88,283
QBE Insurance Group Ltd. 8,253 125,469
Rinker Group Ltd. 4,220 51,108
Stockland 15,779 82,307
Westfield Group 24,989 321,716
------------
972,937
BELGIUM-0.1%
Fortis 4,200 142,997
BERMUDA-0.3%
Nabors Industries Ltd. (a) 9,150 309,179
BRAZIL-0.3%
Cia de Bebidas das Americas PFD (ADR) 1,100 45,375
Petroleo Brasileiro S.A. (ADR) (a) 3,500 288,910
------------
334,285
CANADA-0.5%
Allied Properties Real Estate Investment Trust 3,700 58,733
Boardwalk Real Estate
Investment Trust 3,100 71,231
Canadian Apartment Properties Real Estate Investment
Trust 2,000 29,401
Canadian Natural Resources Ltd. 1,000 55,290
Canadian Real Estate Investment Trust 1,650 35,622
Cominar Real Estate Investment Trust 1,500 26,015
Dundee Real Estate Investment Trust 1,800 45,472
H&R Real Estate Investment Trust 2,500 51,465
Primaris Retail Real Estate Investment Trust 2,350 34,209
RioCan Real Estate Investment Trust 4,175 80,934
Summit Real Estate Investment Trust 2,200 50,452
------------
538,824
CHINA-0.3%
China Netcom Group Corp., Ltd. 59,000 103,466
China Petrolium & Chemical Corp. 108,000 61,925
China Shenhua Energy Co., Ltd. 37,000 68,652
PretroChina Co., Ltd. 28,000 29,924
------------
263,967
FINLAND-0.0%
Citycon Oyj 7,800 36,016
6
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
FRANCE-3.3%
Arcelor 2,000 $ 96,794
Arkema (a) 70 2,732
Assurance Generales de France (AGF) 1,300 153,248
Bail Investissement Fonciere 2,100 132,352
BNP Paribas, SA 5,454 521,534
CapGemini, SA 5,304 302,481
Cie Generale d'Optique Essilor International, SA 781 78,555
Credit Agricole, SA 3,480 132,066
European Aeronautic Defence & Space Co. 4,870 139,702
Klepierre 1,690 195,685
Renault, SA 2,300 246,806
Sanofi-Aventis, SA 2,387 232,567
Societe Generale 1,200 176,191
Societe Television Francaise 1 4,345 141,563
Total, SA 3,240 212,842
Unibail 2,475 431,208
Vinci, SA 1,793 184,383
------------
3,380,709
GERMANY-1.3%
Comerzbank AG 4,590 166,201
Continental AG 2,200 224,775
Deutsche Lufthansa AG 4,600 84,732
Deutsche Wohnen AG (a) 150 45,470
E.On AG 1,600 183,881
IVG Immobilien AG 1,300 39,845
Man AG 1,200 86,852
Muenchener Rueckversicherungs AG 1,200 163,747
RWE AG 1,410 117,105
SAP AG 1,041 218,732
------------
1,331,340
HONG KONG-0.8%
Kerry Properties Ltd. 64,287 219,600
New World Development Co., Ltd. 112,900 186,076
Sino Land Co., Ltd. 161,561 258,414
Sun Hung Kai Properties Ltd. 10,700 109,230
------------
773,320
HUNGARY-0.1%
MOL Magyar Olaj-es Gazipari Rt. 600 61,685
IRELAND-0.1%
CRH Plc 4,785 155,903
ISRAEL-0.5%
Bank Leumi Le-Israel 14,400 52,391
Teva Pharmaceutical Industries Ltd. (ADR) 16,050 507,019
------------
559,410
ITALY-0.5%
Buzzi Unicem S.p.A. 3,000 68,754
Eni S.p.A. 6,660 195,624
Luxottica Group S.p.A. 3,205 86,871
UniCredito Italiano S.p.A. 18,592 145,410
------------
496,659
JAPAN-4.9%
Canon, Inc. 7,350 360,218
Honda Motor Co., Ltd. 2,400 76,234
Hoya Corp. 2,300 81,880
Japan Real Estate Investment Corp. 14 124,738
Japan Retail Fund Investment Corp. 13 102,273
Japan Tobacco, Inc. 45 164,340
JFE Holdings, Inc. 5,200 220,780
Komatsu Ltd. 4,000 79,596
Leopalace21 Corp. 2,500 86,122
Mitsubishi Tokyo Financial Group, Inc. 19 266,341
Mitsui & Co., Ltd. 22,000 311,055
Mitsui Chemicals, Inc. 12,400 81,038
Mitsui Fudosan Co., Ltd. 18,100 393,365
Mitsui O.S.K. Lines Ltd. 17,000 115,762
Nippon Building Fund, Inc. 32 310,061
Nippon Telegraph and Telephone Corp. 15 73,239
Nitto Denko Corp. 1,600 113,991
Nomura Holdings, Inc. 14,900 279,829
ORIX Corp. 1,020 248,892
Sony Corp. 1,300 57,317
Sumitomo Heavy Industries Ltd. 16,800 155,230
Sumitomo Mitsui Financial Group, Inc. 43 455,362
Sumitomo Realty & Development Co., Ltd. 12,000 296,102
Takeda Pharmaceutical Co., Ltd. 1,400 87,147
Toyota Motor Corp. 7,200 376,303
------------
4,917,215
KOREA-0.3%
Kookmin Bank 1,200 98,871
POSCO 600 161,123
Samsung Electronics Co., Ltd. 120 76,165
------------
336,159
MEXICO-0.4%
America Movil, SA de C.V. (ADR) 11,950 397,456
7
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
NETHERLANDS-0.7%
ING Groep NV 14,833 $ 582,307
Rodamco Europe NV 850 83,296
Wereldhave NV 355 34,486
------------
700,089
NORWAY-0.2%
Norsk Hydro ASA 6,615 175,444
RUSSIA-0.1%
LUKOIL (ADR) 1,044 87,278
SINGAPORE-0.2%
Ascendas Real Estate Investment Trust 58,650 71,365
CapitaMall Trust 28,600 38,286
Flextronics International Ltd. (a) 6,800 72,216
------------
181,867
SOUTH AFRICA-0.1%
Naspers Ltd. 1,969 33,467
Standard Bank Group Ltd. 6,900 73,746
------------
107,213
SPAIN-0.5%
Banco Bilbao Vizcaya Argentaria, SA 9,508 195,649
Endesa, SA 3,700 128,556
Inmobiliaria Urbis, SA 1,600 41,646
Repsol YPF, SA 5,300 151,781
------------
517,632
SWEDEN-0.2%
Atlas Copco AB 7,364 205,063
SWITZERLAND-2.1%
ABB Ltd. 15,188 197,201
Alcon, Inc. 5,475 539,560
Credit Suisse Group 6,661 371,631
Nestle, SA 486 152,366
Nobel Biocare Holding AG 320 75,850
Novartis AG 3,258 175,823
Roche Holding AG 1,650 272,271
UBS AG 2,785 304,861
------------
2,089,563
TAIWAN-0.4%
Foxconn Technology Co., Ltd. 7,000 56,161
High Tech Computer Corp. 5,000 137,439
Largan Precision Co., Ltd. 1,000 21,376
Quanta Computer, Inc. (GDR) 5,725 45,797
Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) 9,912 90,992
United Microelectronics Corp. 109,000 64,736
------------
416,501
UNITED KINGDOM-4.0%
AstraZeneca Plc 2,000 120,263
Aviva Plc 11,100 157,096
BAE Systems Plc 10,800 73,781
Barclays Plc 13,900 157,575
BG Group Plc 7,313 97,612
BHP Billiton Plc 8,251 160,528
BP Plc 7,100 82,323
British American Tobacco Plc 13,383 336,948
British Land Co. Plc 11,116 259,266
Brixton Plc 2,200 19,466
Capital & Regional Plc 8,085 150,907
Derwent Valley Holdings Plc 1,200 34,754
Friends Provident Plc 20,270 67,026
GlaxoSmithKline Plc 1,800 50,233
Hammerson Plc 4,850 106,023
HBOS Plc 9,150 158,790
J Sainsbury Plc 19,100 117,960
Land Securities Group Plc 8,849 293,230
Liberty International Plc 3,225 63,438
Man Group Plc 2,018 95,001
Marks & Spencer Group Plc 13,388 145,196
Prudential Plc 10,523 118,994
Rio Tinto Plc 4,938 260,016
Royal Bank of Scotland Group Plc 6,100 200,233
SABMiller Plc 5,776 103,983
Slough Estates Plc 6,200 70,011
Standared Chartered 3,504 85,498
Vodafone Group Plc 84,600 180,059
WPP Group Plc 3,573 43,191
Xstrata Plc 6,602 251,288
------------
4,060,689
Total Foreign Investments
(cost $20,877,444) 23,549,400
Total Common and Preferred Stocks
(cost $58,853,519) 64,163,144
U.S. GOVERNMENT & GOVERNMENT SPONSORED AGENCY
OBLIGATIONS-18.7%
FEDERAL AGENCIES-0.9%
Federal National Mortgage Association
3.875%, 2/15/10 $ 955 905,802
MORTGAGE PASS-THROUGHS-14.2%
Federal Gold Loan Mortgage Corp.
4.50%, 9/01/35-6/01/36 686 622,200
Federal National Mortgage Association
4.175%, 9/01/35 177 174,370
4.235%, 9/01/34 154 152,067
4.50%, 3/01/20-11/01/20 985 930,996
8
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
4.50%, TBA $ 70 $ 66,150
4.662%, 7/01/35 (b) 157 155,364
4.774%, 4/01/35 (b) 62 60,926
5.00%, 4/01/19-6/01/21 954 920,282
5.00%,TBA 1,095 1,025,452
5.50%, 6/01/21 895 878,615
5.50%, TBA 5,615 5,392,151
5.813%, 3/01/36 (b) 177 176,344
5.925%, 5/01/36 (b) 54 53,159
5.948%, 6/01/36 (b) 134 134,561
6.00%, TBA 2,430 2,391,271
6.50%, 1/01/36 1,085 1,090,425
6.50%, TBA 102 103,160
------------
14,327,493
UNITED STATES TREASURY SECURITIES-3.6%
U.S. Treasury Bonds
5.375%, 2/15/31 650 661,223
7.25%, 5/15/16 1,145 1,325,786
U.S. Treasury Notes
4.25%, 10/31/07-1/15/11 1,065 1,044,484
4.50%, 11/15/15 670 638,175
------------
3,669,668
Total U.S. Government & Government
Sponsored Agency Obligations
(cost $19,141,637) 18,902,963
CORPORATE DEBT OBLIGATIONS-5.3%
AUTOMOTIVE-0.2%
DaimlerChrysler North America Holdings
4.875%, 6/15/10 25 23,898
Ford Motor Credit Co.
7.375%, 10/28/09 160 147,926
------------
171,824
BANKS-0.2%
Bank of America Corp.
4.50%, 8/01/10 100 95,893
JPMorgan Chase & Co.
6.75%, 2/01/11 80 83,151
Wells Fargo Co.
4.20%, 1/15/10 35 33,447
Zions Bancorporation
5.50%, 11/16/15 35 33,356
------------
245,847
FINANCE-1.7%
Assurant, Inc.
5.625%, 2/15/14 35 33,573
Berkshire Hathaway Finance Corp.
4.20%, 12/15/10 50 47,179
Boeing Capital Corp.
4.75%, 8/25/08 35 34,394
Cit Group, Inc.
5.50%, 11/30/07 35 34,884
7.75%, 4/02/12 50 54,202
Citigroup, Inc.
4.625%, 8/03/10 75 72,254
Citigroup, Inc.
5.423%, 6/09/09 (b) 20 20,047
Countrywide Home Loan
4.00%, 3/22/11 65 59,802
4.25%, 12/19/07 55 53,885
General Electric Capital Corp.
4.375%, 11/21/11 25 23,484
6.75%, 3/15/32 60 64,045
Goldman Sachs Group, Inc.
4.75%, 7/15/13 35 32,563
HSBC Finance Corp.
6.50%, 11/15/08 80 81,414
7.00%, 5/15/12 40 42,093
Istar Financial, Inc.
5.15%, 3/01/12 20 19,016
KFW (c)
1.85%, 9/20/10 64,000 571,074
Kinder Morgan Finance Co. ULC
5.35%, 1/05/11 44 40,539
Liberty Mutual Group, Inc.
5.75%, 3/15/14 (d) 35 32,874
Merrill Lynch & Co.
Series C
4.25%, 2/08/10 120 114,054
Simon Property Group LP
6.375%, 11/15/07 30 30,125
SLM Corp.
4.50%, 7/26/10 55 52,436
TXU Australia
6.15%, 11/15/13 (d) 238 236,743
------------
1,750,680
INDUSTRIALS-1.5%
Altria Group, Inc.
7.75%, 1/15/27 25 28,052
British Sky Broadcasting
8.20%, 7/15/09 20 21,239
Cablevision Systems Corp.
Series B
8.00%, 4/15/12 30 29,588
Comcast Cable Communications Holdings, Inc.
6.20%, 11/15/08 40 40,396
6.875%, 6/15/09 50 51,446
9.455%, 11/15/22 40 49,700
9
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Comcast Corp.
5.30%, 1/15/14 $ 40 $ 37,633
5.50%, 3/15/11 50 49,106
Conagra Foods, Inc.
6.75%, 9/15/11 10 10,308
7.875%, 9/15/10 19 20,330
Cox Enterprises
4.375%, 5/01/08 (d) 40 38,715
DirecTV Holdings LLC
6.375%, 6/15/15 25 23,063
Fortune Brands, Inc.
2.875%, 12/01/06 20 19,758
GSC Holdings Corp.
8.00%, 10/01/12 30 30,000
IBM Corp.
4.375%, 6/01/09 20 19,385
International Paper Co.
5.30%, 4/01/15 55 50,647
Ispat Inland ULC
9.75%, 4/01/14 25 27,563
Kraft Foods, Inc.
4.125%, 11/12/09 115 109,305
Kroger Co.
7.80%, 8/15/07 45 45,801
Lubrizol Corp.
4.625%, 10/01/09 20 19,257
MGM Mirage, Inc.
8.375%, 2/01/11 25 25,625
Motorola, Inc.
7.625%, 11/15/10 5 5,354
News America, Inc.
6.55%, 3/15/33 25 23,304
Packaging Corporation of America
5.75%, 8/01/13 30 28,524
Panamsat Corp.
9.00%, 8/15/14 25 25,375
R.H. Donnelley Corp.
6.875%, 1/15/13 (d) 20 18,400
8.875%, 1/15/16 (d) 10 10,088
Safeway, Inc.
4.125%, 11/01/08 18 17,286
4.80%, 7/16/07 20 19,772
6.50%, 3/01/11 15 15,160
Textron Financial Corp.
4.125%, 3/03/08 80 77,942
Time Warner Entertainment
8.375%, 3/15/23 65 72,278
Tyco International Group, SA
6.00%, 11/15/13 85 84,209
Waste Management, Inc.
6.875%, 5/15/09 40 41,127
WellPoint, Inc.
3.50%, 9/01/07 65 63,163
3.75%, 12/14/07 16 15,547
4.25%, 12/15/09 80 76,306
Westvaco Corp.
8.20%, 1/15/30 15 16,247
Weyerhaeuser Co.
5.95%, 11/01/08 35 35,028
Williams Cos., Inc.
7.875%, 9/01/21 25 25,375
WPP Finance (UK) Corp.
5.875%, 6/15/14 25 24,224
Wyeth
5.50%, 2/01/14 40 38,650
------------
1,480,276
OIL-0.2%
Amerada Hess Corp.
7.875%, 10/01/29 55 61,362
Conoco, Inc.
6.95%, 4/15/29 40 43,526
Enterprise Products Operating LP
5.60%, 10/15/14 25 23,666
NRG Energy, Inc.
7.25%, 2/01/14 5 4,875
7.375%, 2/01/16 20 19,500
Valero Energy Corp.
6.875%, 4/15/12 45 46,645
7.50%, 4/15/32 5 5,429
------------
205,003
TELECOMMUNICATIONS-0.8%
AT&T Corp.
7.30%, 11/15/11 40 42,461
8.00%, 11/15/31 15 17,222
British Telecom Plc
8.375%, 12/15/10 100 109,787
Cingular Wireless LLC
5.625%, 12/15/06 50 50,001
Cingular Wireless Services
7.875%, 3/01/11 115 123,869
8.75%, 3/01/31 35 42,911
Embarq Corp.
6.738%, 6/01/13 5 4,985
Sprint Capital Corp.
8.375%, 3/15/12 120 132,587
Telecom Italia Capital
4.00%, 1/15/10 120 112,293
Telus Corp. (Canada)
7.50%, 6/01/07 120 121,756
Vodafone Group Plc
5.50%, 6/15/11 60 58,606
------------
816,478
UTILITIES-0.7%
Carolina Power & Light
6.50%, 7/15/12 65 66,790
Consumers Energy
4.25%, 4/15/08 25 24,299
Duke Capital LLC
8.00%, 10/01/19 60 67,838
Duke Energy Field Services
7.875%, 8/16/10 15 16,032
10
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Exelon Corp.
6.75%, 5/01/11 $ 25 $ 25,862
Firstenergy Corp.
Series B
6.45%, 11/15/11 65 66,139
Series C
7.375%, 11/15/31 55 59,007
Midamerican Energy Holdings
5.875%, 10/01/12 30 29,760
NiSource Finance Corp.
7.875%, 11/15/10 40 42,793
Pacific Gas & Electric
4.80%, 3/01/14 65 60,571
6.05%, 3/01/34 5 4,719
Progress Energy
7.10%, 3/01/11 40 41,726
Public Service Company of Colorado
7.875%, 10/01/12 30 33,150
Qwest Communications International, Inc.
7.50%, 2/15/14 25 24,375
Telecom Italia Capital
6.00%, 9/30/34 65 56,122
Verizon Global Funding Corp.
4.90%, 9/15/15 35 31,644
Verizon New Jersey, Inc.
Series A
5.875%, 1/17/12 45 44,035
Xcel Energy, Inc.
7.00%, 12/01/10 30 31,249
------------
726,111
Total Corporate Debt Obligations
(cost $5,586,959) 5,396,219
SOVEREIGN DEBT OBLIGATIONS-4.5%
BRAZIL-0.3%
Federal Republic of Brazil
8.25%, 1/20/34 (c) 245 257,250
JAPAN-0.9%
Japan Finance Corp. for Municipal Enterprises
1.55%, 2/21/12 (c) 102,000 892,352
MEXICO-0.8%
Mexican Bonos
Series M7
8.00%, 12/24/08 (c) 3,990 350,924
Series M20
10.00%, 12/05/24 (c) 3,640 336,585
Series MI10
9.00%, 12/20/12 (c) 1,790 159,172
------------
846,681
NORWAY-0.2%
Government of Norway
6.00%, 5/16/11 (c) 1,095 189,930
PANAMA-0.1%
Republic of Panama
6.70%, 1/26/36 99 87,764
POLAND-0.5%
Goverment of Poland
6.00%, 11/24/10 (c) 780 248,533
6.25%, 10/24/15 (c) 825 269,696
------------
518,229
RUSSIA-0.3%
Russian Federation
5.00%, 3/31/30 (d)(e) 320 339,200
SWEDEN-1.3%
Government of Sweden
5.00%, 1/28/09 (c) 1,575 226,749
5.25%, 3/15/11 (c) 7,500 1,105,603
------------
1,332,352
UKRAINE-0.1%
Governement of Ukraine
7.65%, 6/11/13 (d) 100 100,500
Total Sovereign Debt Obligations
(cost $4,569,937) 4,564,258
COMMERCIAL MORTGAGE BACKED SECURITIES-3.9%
Banc of America Commercial Mortgage, Inc.
Series 2001-PB1 Cl. A2
5.787%, 5/11/35 173 172,928
Series 2004-4 Cl. A3
4.128%, 7/10/42 200 191,453
Series 2004-6 Cl. A2
4.161%, 12/10/42 65 62,078
Series 2005-6 Cl. A4
5.181%, 9/10/47 (f) 115 109,958
Bear Stearns ALT-A Trust
Series 2005-10 Cl. 24A1
5.972%, 1/25/36 (f) 112 111,347
Series 2006-1 Cl. 22A1
5.439%, 2/25/36 (f) 276 272,342
Series 2006-2 Cl. 23A1
6.00%, 3/25/36 (f) 116 115,480
Series 2006-3 Cl. 22A1
6.25%, 5/25/36 (f) 87 87,002
Citigroup Commercial Mortgage Trust
Series 2004-C1 Cl. A4
5.463%, 4/15/40 (f) 110 107,137
11
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
Series 2005-2 Cl. 1A4
5.122%, 5/25/35 (f) $ 154 $ 150,187
Series 2006-AR1 Cl. 3A1
5.50%, 3/27/36 (b) 178 175,314
Credit Suisse Mortgage Capital Cerificates
Series 2006-C3 Cl. A3
5.828%, 6/15/38 (f) 190 189,818
CS First Boston Mortgage Securities Corp.
Series 2003-CK2 Cl. A2
3.861%, 3/15/36 45 43,563
Series 2004-C1 Cl. A4
4.75%, 1/15/37 70 65,050
Freddie Mac Reference REMIC
Series R007 Cl. AC
5.875%, 5/15/16 296 293,788
GE Capital Commercial Mortgage Corp.
Series 2005-C3 Cl. A3FX
4.863%, 7/10/45 360 349,298
GS Mortgage Securities Corp. II
Series 2004-GG2 Cl. A6
5.396%, 8/10/38 (f) 80 77,493
Indymac Index Mortgage Loan Trust
Series 2006-AR7 Cl. 4A1
6.269%, 4/30/36 (f) 107 106,693
JPMorgan Chase Commercial Mortgage
Series 2005-LDP5 Cl. A2
5.198%, 12/15/44 60 58,686
Series 2006-CB14 Cl. A4
5.481%, 12/12/44 (f) 50 48,441
JPMorgan Chase Commercial Mortgage Securities Corp.
Series 2004-C1 Cl. A2
4.302%, 1/15/38 60 56,285
Series 2005-LDP3 Cl. A2
4.851%, 8/15/42 100 96,761
Series 2005-LDP4 Cl. A2
4.79%, 10/15/42 45 43,409
Series 2006-CB15 Cl. A4
5.814%, 6/12/43 (f) 40 39,602
LB-UBS Commercial Mortgage Trust
Series 2004-C4 Cl. A4
5.305%, 6/15/29 (f) 40 38,856
Series 2004-C8 Cl. A2
4.201%, 12/15/29 125 119,474
Series 2005-C1 Cl. A4
4.742%, 2/15/30 120 111,200
Series 2005-C7 Cl. A4
5.197%, 11/15/30 (f) 50 47,695
Merrill Lynch Mortgage Investors, Inc.
Series 2006-A1 Cl. 2A1
6.233%, 3/25/36 (f) 169 168,695
Merrill Lynch Mortgage Trust
Series 2005-CKI1 Cl. A6
5.417%, 11/12/37 (f) 40 38,397
Merrill Lynch/Countrywide Commercial Mortgage Trust
Series 2006-2 Cl. A4
5.91%, 6/12/46 (f) 40 40,172
Opteum Mortgage Acceptance Corp.
Series 2005-5 Cl. 2A1B
5.64%, 11/25/35 (f) 100 98,312
Residential Funding Mortgage
Series 2005-AS3 Cl. 3A
5.247%, 8/25/35 (f) 104 102,014
Structured Adjustable Rate Mortgage Trust
Series 2006-3 Cl. 2A1
6.017%, 4/25/36 (f) 101 100,779
Washington Mutual
Series 2005-AR2 Cl. 2A22
5.543%, 1/25/45 (b) 24 23,812
Total Commercial Mortgage Backed Securities
(cost $3,947,588) 3,913,519
ASSET-BACKED SECURITIES-1.1%
Aegis Asset Backed Securties Trust
Series 2004-3 Cl. A2A
5.523%, 9/25/34 (b) 12 11,924
Bear Stearns Asset Backed Securities, Inc.
Series 2005-SD1 Cl. 1A1
5.473%, 4/25/22 (b) 25 25,251
Capital Auto Receivables Asset Trust
Series 2005-SN1A Cl. A3A
4.10%, 6/15/08 60 59,545
Capital One Prime Auto Receivables Trust
Series 2005-1 Cl. A3
4.32%, 8/15/09 155 153,225
Credit-Based Asset Servicing and Securities
Series 2003-CB1 Cl. AF2
3.45%, 1/25/33 (e) 35 33,199
Series 2005-CB17 Cl. AF2
5.147%, 11/25/35 (e) 170 168,023
Home Equity Mortgage Trust
Series 2005-4 Cl. A3
4.742%, 1/25/36 (e) 95 93,408
Series 2006-1 Cl. A2
5.30%, 3/25/36 (e) 30 29,609
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
HSI Asset Securitization Corp. Trust
Series 2006-OPT2 Cl. 2A1
5.403%, 1/25/36 (b) $ 56 $ 56,021
MBNA Credit Card Master Note Trust
Series 2003-A6 Cl. A6
2.75%, 10/15/10 85 80,843
Merrill Lynch Mortgage Investors, Inc.
Series 2005-8 Cl. A1C1
5.25%, 8/25/36 (f) 155 150,906
Providian Gateway Master Trust
Series 2004-DA Cl. A
3.35%, 9/15/11 (d) 120 116,784
Residential Asset Mortgage Products, Inc.
Series 2005-RS1 Cl. AII1
5.433%, 1/25/35 (b) 7 7,179
Residential Asset Securities Corp.
Series 2003-KS3 Cl. A2
5.381%, 5/25/33 (b) 6 6,030
Residential Funding Mortgage
Series 2005-HI2 Cl. A3
4.46%, 5/25/35 30 29,393
Specialty Underwriting & Residential Finance
Series 2006-BC1 Cl. A2A
5.403%, 12/25/36 (b) 57 57,174
Structured Asset Investment Loan Trust
Series 2006-1 Cl. A1
5.403%, 1/25/36 (b) 50 49,709
Total Asset-Backed Securities
(cost $1,130,035) 1,128,223
SHORT-TERM INVESTMENTS-12.9%
FEDERAL AGENCIES-10.3%
Federal Home Loan Bank
Zero Coupon, 7/12/06 4,260 4,254,514
Federal Home Loan Mortgage Corp.
Zero Coupon, 7/21/06 2,970 2,962,352
Federal National Mortgage Association
Zero Coupon, 8/14/06 3,265 3,245,403
------------
10,462,269
TIME DEPOSIT-2.6%
The Bank of New York
4.25%, 7/03/06 2,580 2,580,000
Total Short-Term Investments
(cost $13,034,224) 13,042,269
TOTAL INVESTMENTS-109.7%
(cost $106,263,899) 111,110,595
Other assets less liabilities-(9.7%) (9,837,339)
NET ASSETS-100% $101,273,256
FORWARD EXCHANGE CURRENCY CONTRACTS (SEE NOTE D)
U.S. $
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION/
(000) DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------
BUY CONTRACTS:
Mexican Peso, settling 7/20/06 230 $ 20,092 $ 20,226 $ 134
Mexican Peso, settling 7/20/06 2,064 182,682 181,829 (853)
Polish Zloty, settling 7/05/06 821 257,647 258,253 606
Polish Zloty, settling 7/12/06 61 19,000 19,291 291
Swedish Krona, settling 7/25/06 139 19,000 19,406 406
SALE CONTRACTS:
Japanese Yen, settling 7/07/06 169,117 1,496,733 1,478,475 18,258
Mexican Peso, settling 7/05/06 2,064 182,820 181,983 837
Mexican Peso, settling 7/20/06 12,496 1,092,132 1,100,858 (8,726)
Mexican Peso, settling 7/20/06 58 5,093 5,148 (55)
Norwegian Krone, settling 7/28/06 1,203 192,250 193,662 (1,412)
Polish Zloty, settling 7/12/06 941 300,145 296,230 3,915
Polish Zloty, settling 7/12/06 821 257,705 258,322 (617)
Swedish Krona, settling 7/25/06 10,061 1,374,635 1,400,703 (26,068)
13
BALANCED WEALTH STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
FINANCIAL FUTURES CONTRACTS PURCHASED (SEE NOTE D)
NUMBER OF EXPIRATION ORIGINAL VALUE AT UNREALIZED
TYPE CONTRACTS MONTH VALUE JUNE 30, 2006 APPRECIATION
- -------------------------------------------------------------------------------
Euro Stoxx September
50 Index 6 2006 $269,619 $281,033 $11,414
(a) Non-income producing security.
(b) Floating rate security. Stated rate was in effect at June 30, 2006.
(c) Positions, or portion thereof, with an aggregate market value of
$4,607,868 have been segregated to collateralize forward exchange currency
contracts.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $893,304 or 0.9% of net assets.
(e) Coupon increases periodically based upon a predetermined schedule. Stated
interest rate in effect at June 30, 2006.
(f) Variable rate coupon, rate shown as of June 30, 2006.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
TBA - To Be Assigned-Securities are purchased on a forward commitment with
an approximate principal amount (generally +/- 1.0%) and no definite maturity
date. The actual principal amount and maturity date will be determined upon
settlement when the specific mortgage pools are assigned.
See Notes to Financial Statements.
14
BALANCED WEALTH STRATEGY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $106,263,899) $ 111,110,595
Cash 12,092
Foreign cash, at value (cost $335,307) 340,458(a)
Unrealized appreciation of forward exchange currency
contracts 24,447
Receivable for investment securities sold and foreign
currency contracts 930,519
Dividends and interest receivable 357,850
Receivable for capital stock sold 146,249
Receivable for variation margin on futures contracts 11,204
Total assets 112,933,414
LIABILITIES
Unrealized depreciation of forward exchange currency
contracts 37,731
Payable for investment securities purchased and foreign
currency contracts 11,459,759
Advisory fee payable 47,328
Distribution fee payable 19,358
Payable for capital stock redeemed 6,869
Foreign capital gain tax payable 392
Transfer agent fee payable 118
Accrued expenses 88,603
Total liabilities 11,660,158
NET ASSETS $ 101,273,256
COMPOSITION OF NET ASSETS
Capital stock, at par $ 8,797
Additional paid-in capital 94,809,905
Undistributed net investment income 620,743
Accumulated net realized gain on investment and foreign
currency transactions 967,111
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 4,866,700
$ 101,273,256
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 9,971,281 863,031 $11.55
B $91,301,975 7,934,120 $11.51
(a) An amount equivalent to U.S. $20,337 has been segregated as collateral for
the financial futures contracts outstanding at June 30, 2006
See Notes to Financial Statements.
15
BALANCED WEALTH STRATEGY PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest (net of foreign taxes withheld of $502) $ 818,010
Dividends (net of foreign taxes withheld of $41,206) 613,329
Total investment income 1,431,339
EXPENSES
Advisory fee 240,594
Distribution fee--Class B 96,777
Transfer agency--Class A 97
Transfer agency--Class B 774
Custodian 176,589
Administrative 39,000
Audit 21,133
Printing 17,455
Legal 1,594
Directors' fees 638
Miscellaneous 3,437
Total expenses 598,088
Less: expenses waived and reimbursed by the Adviser
(see Note B) (39,000)
Net expenses 559,088
Net investment income 872,251
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 1,403,503
Futures (14,676)
Foreign currency transactions (123,922)
Net change in unrealized appreciation/depreciation of:
Investments (837,673)(a)
Futures 10,793
Foreign currency denominated assets and liabilities 8,133
Net gain on investment and foreign currency transactions 446,158
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,318,409
(a) Net of accrued foreign capital gains taxes of $66.
See Notes to Financial Statements.
16
BALANCED WEALTH STRATEGY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 872,251 $ 708,508
Net realized gain (loss) on investment
and foreign currency transactions 1,264,905 (417,954)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (818,747) 4,401,017
Net increase in net assets from operations 1,318,409 4,691,571
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (80,464) (41,650)
Class B (611,974) (176,967)
Net realized gain on investment and
foreign currency transactions
Class A -0- (22,100)
Class B -0- (97,897)
CAPITAL STOCK TRANSACTIONS
Net increase 26,576,430 42,763,265
Total increase 27,202,401 47,116,222
NET ASSETS
Beginning of period 74,070,855 26,954,633
End of period (including undistributed
net investment income of $620,743 and
$440,930, respectively) $ 101,273,256 $ 74,070,855
See Notes to Financial Statements.
17
BALANCED WEALTH STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Balanced Wealth Strategy Portfolio (the "Portfolio") is a
series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund").
The Portfolio's investment objective is to seek long-term growth of capital.
The Portfolio is diversified as defined under the Investment Company Act of
1940. The Fund was incorporated in the State of Maryland on November 17, 1987,
as an open-end series investment company. The Fund offers twenty-three
separately managed pools of assets which have differing investment objectives
and policies. The Portfolio commenced operations on July 1, 2004. 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
7. REPURCHASE AGREEMENTS
It is the policy of the Portfolio that its custodian or designated subcustodian
take control of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of collateral by the
Portfolio may be delayed or limited.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an 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.
19
BALANCED WEALTH STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser has agreed to waive its fees and bear certain expenses to the
extent necessary to limit total operating expenses on an annual basis to 1.20%
and 1.45% of the daily average net assets for Class A and Class B shares,
respectively. For the six months ended June 30, 2006 there were no such
expenses waived by the Adviser.
Pursuant to the terms of the investment advisory agreement, the Portfolio has
agreed to reimburse the Adviser for the cost of providing the Portfolio with
certain legal and accounting services. Due to the Adviser's agreement to limit
total operating expenses as described above, the Adviser waived reimbursement
for such services in the amount of $39,000 for the six months ended June 30,
2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $50,115, none of which was paid to Sanford C.
Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
NOTEC: 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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006 were as follows:
PURCHASES SALES
-------------- --------------
Investment securities
(excluding U.S. government securities) $ 45,161,328 $ 20,094,939
U.S. government securities 78,400,682 76,996,396
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding futures and
foreign currency transactions) are as follows:
Gross unrealized appreciation $ 6,766,161
Gross unrealized depreciation (1,919,465)
Net unrealized appreciation $ 4,846,696
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
1. FINANCIAL FUTURES CONTRACTS
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse effects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments and the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities hedged or used for cover.
At the time the Portfolio enters into a futures contract, the Portfolio
deposits and maintains as collateral an initial margin with the broker, as
required by the exchange on which the transaction is affected. 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. 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.
2. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Portfolio has in that particular
currency contract.
3. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value. For
the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
21
BALANCED WEALTH STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares issued
in reinvestment
of dividends and
distributions 7,034 5,997 $ 80,464 $ 63,750
Net increase 7,034 5,997 $ 80,464 $ 63,750
CLASS B
Shares sold 2,740,641 4,906,020 $ 32,047,918 $ 52,487,529
Shares issued
in reinvestment
of dividends and
distributions 53,682 25,930 611,974 274,863
Shares redeemed (532,400) (933,519) (6,163,926) (10,062,877)
Net increase 2,261,923 3,998,431 $ 26,495,966 $ 42,699,515
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
Interest Rate Risk and Credit Risk--Interest rate risk is the risk that changes
in interest rates will affect the value of the Portfolio's investments in
fixed-income debt securities such as bonds or notes. Increases in interest
rates may cause the value of the Portfolio's investments to decline. Credit
risk is the risk that the issuer or guarantor of a debt security, or the
counterparty to a derivative contract, will be unable or unwilling to make
timely principal and/or interest payments, or to otherwise honor its
obligations. The degree of risk for a particular security may be reflected in
its credit risk rating. Credit risk is greater for medium quality and
lower-rated securities. Lower-rated debt securities and similar unrated
securities (commonly known as "junk bonds") have speculative elements or are
predominantly speculative risks.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
NOTE: H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
-------------- --------------
Distributions paid from:
Ordinary income $ 335,465 $ -0-
Net long-term capital gains 3,149 -0-
Total distributions paid $ 338,614 $ -0-
NOTE I: COMPONENT OF ACCUMULATED EARNINGS (DEFICIT)
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 676,674
Accumulated capital and other losses (118,391)(a)
Unrealized appreciation/(depreciation) 5,270,300(b)
Total accumulated earnings/(deficit) $ 5,828,583
(a) On December 31, 2005, the Portfolio had a net capital loss carryforward of
$112,135, all of which expires in the year 2013. To the extent future capital
gains are offset by capital loss carryforwards, such gains will not be
distributed. Net foreign currency losses and passive foreign investment company
losses incurred after October 31, and within the taxable year are deemed to
arise on the first business day of the Portfolio's next taxable year. For the
year ended December 31, 2005, the Portfolio deferred until January 1, 2006,
post-October foreign currency losses of $2,960, and post-October passive
foreign investment company losses of $3,296.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales and the tax treatment of passive foreign investment
companies.
NOTE J: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee with respect to certain AllianceBernstein funds, including certain of the
Fund's port-
23
BALANCED WEALTH STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
folios. On September 7, 2004, the Fund's investment advisory agreement was
amended to reflect the reduced advisory fee for those portfolios.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
25
BALANCED WEALTH STRATEGY PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
---------------------------------------
JULY 1,
SIX MONTHS 2004(a)
ENDED YEAR ENDED TO
JUNE 30, 2006 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2005 2004
----------- ------------ ------------
Net asset value, beginning of period $11.39 $10.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .13 .18 .07
Net realized and unrealized gain on
investment and foreign currency
transactions .12 .60 .62
Net increase in net asset value from
operations .25 .78 .69
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.09) (.05) -0-
Distributions from net realized gain
on investment and foreign currency
transactions -0- (.03) -0-
Total dividends and distributions (.09) (.08) -0-
Net asset value, end of period $11.55 $11.39 $10.69
TOTAL RETURN
Total investment return based on
net asset value (d) 2.24% 7.30% 6.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $9,971 $9,746 $9,089
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.04%(e)(f) 1.20% 1.20%(f)
Expenses, before waivers and
reimbursements 1.13%(e)(f) 1.54% 2.87%(f)
Net investment income (c) 2.19%(e)(f) 1.64% 1.36%(f)
Portfolio turnover rate 66% 139% 44%
See footnote summary on page 27.
26
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
---------------------------------------
JULY 1,
SIX MONTHS 2004(a)
ENDED YEAR ENDED TO
JUNE 30, 2006 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2005 2004
----------- ------------ ------------
Net asset value, beginning of period $11.34 $10.67 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .12 .15 .06
Net realized and unrealized gain
on investment and foreign
currency transactions .13 .60 .61
Net increase in net asset value
from operations .25 .75 .67
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.08) (.05) -0-
Distributions from net realized
gain on investment and foreign
currency transactions -0- (.03) -0-
Total dividends and distributions (.08) (.08) -0-
Net asset value, end of period $11.51 $11.34 $10.67
TOTAL RETURN
Total investment return based
on net asset value (d) 2.21% 7.01% 6.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $91,302 $64,325 $17,866
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.29%(e)(f) 1.45% 1.45%(f)
Expenses, before waivers and
reimbursements 1.38%(e)(f) 1.77% 3.34%(f)
Net investment income (c) 1.98%(e)(f) 1.31% 1.49%(f)
Portfolio turnover rate 66% 139% 44%
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived and reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
27
BALANCED WEALTH STRATEGY
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Balanced Wealth Strategy Portfolio (the "Fund"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services.
2. Management fees charged by other mutual fund companies for like services.
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit.
4. Profit margins of the Adviser and its affiliates from supplying such
services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Balanced 55 bp on 1st $2.5 billion Balanced Wealth
45 bp on next $2.5 billion Strategy Portfolio
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT(3) DAILY NET ASSETS
- -------------------------------------------------------------------------------
Balanced Wealth Strategy Portfolio(4) $34,500 0.41%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
(3) The Fund commenced operations on July 1, 2004. Therefore, the
reimbursement amount to the Advisor is for a 6 month period.
(4) The expense reimbursement has been waived by the Adviser.
28
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's most recent fiscal year. The waiver is terminable by the Adviser on
May 1st of each year upon at least 60 days written notice. The gross expense
ratios of the Fund during the most recently completed fiscal year are also
listed below.
EXPENSE CAP PURSUANT TO GROSS
EXPENSE LIMITATION EXPENSE
FUND UNDERTAKING RATIO FISCAL YEAR END
- -------------------------------------------------------------------------------
Balanced Wealth Class A 1.20% 2.87% December 31
Strategy Portfolio Class B 1.45% 3.34%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the fee waiver or expense reimbursement that effectively
reduce the contractual fee rates. In addition, the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
29
BALANCED WEALTH STRATEGY
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Balanced Wealth
Strategy Portfolio 0.550 0.720 2/15
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO(%)(8) MEDIAN(%) RANK MEDIAN(%) RANK
- -------------------------------------------------------------------------------
Balanced Wealth
Strategy Portfolio 1.201 0.792 34/36 0.900 14/15
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser did not earn a profit during calendar 2004 primarily as a
result of the Adviser having to reimburse the Fund for additional expenses
incurred above the Funds expense cap limitation.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
30
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Balanced Wealth Strategy Portfolio $10,258
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Balanced Wealth Strategy Portfolio $113,088
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $409 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
31
BALANCED WEALTH STRATEGY
SENIOR OFFICER FEE EVALUATION
(CONTINUED)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
- -------------------------------------------------------------------------------
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1 year performance rankings of
the Fund(10) relative to its Lipper Performance Group(11) and Lipper
Performance Universe(12) for the period ended September 30, 2005.
BALANCED WEALTH STRATEGY PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 4/15 9/35
Set forth below are the 1 year and since inception performance returns of the
Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
BALANCED WEALTH STRATEGY PORTFOLIO 11.39 11.50
S&P 500 Index 12.25 11.82
Lehman Brothers Aggregate Bond Index 2.80 4.31
60% S&P 500 Index, 40% Lehman Brothers
Aggregate Bond Index 8.47 8.82
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information
for periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
32
(This page left intentionally blank.)
- -------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
- -------------------------------------------------------------------------------
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
> ALLIANCEBERNSTEIN WEALTH APPRECIATION STRATEGY PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
> Are Not FDIC Insured
> May Lose Value
> Are Not Bank Guaranteed
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 AllianceBernstein's website at
www.alliancebernstein.com or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
WEALTH APPRECIATION STRATEGY PORTFOLIO
FUND EXPENSES
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees of other expenses of any
variable insurance product. If suce expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees of other expenses of any variable insurance product. If suce
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 ENDING
VARP - WEALTH ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
APPRECIATION PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- -----------------------------------------------------------------------------------------------
CLASS A
Actual $ 1,000 $ 1,031.75 $ 5.99 1.19%
Hypothetical (5%
return before
expenses) $ 1,000 $ 1,018.89 $ 5.96 1.19%
CLASS B
Actual $ 1,000 $ 1,031.08 $ 7.25 1.44%
Hypothetical (5%
return before
expenses) $ 1,000 $ 1,017.65 $ 7.20 1.44%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
WEALTH APPRECIATION STRATEGY PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------
Exxon Mobil Corp. $ 657,978 1.9%
Procter & Gamble Co. 585,190 1.7
Google, Inc. Cl. A 555,611 1.6
JPMorgan Chase & Co. 552,299 1.6
WellPoint, Inc. 545,774 1.6
Citigroup, Inc. 512,549 1.5
Apple Computer, Inc. 488,375 1.5
Halliburton Co. 487,188 1.4
American International Group, Inc. 481,258 1.4
The Boeing Co. 477,126 1.4
----------- ------
$ 5,343,348 15.6%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
PERCENT OF
SECTOR U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------
Finance $ 9,539,806 27.8%
Technology / Electronics 4,576,673 13.3
Construction & Housing 3,830,778 11.1
Energy 3,189,301 9.3
Medical 2,805,742 8.2
Capital Equipment 2,401,461 7.0
Consumer Staples 2,256,985 6.6
Consumer Cyclical 2,208,514 6.4
Industrial Commodities 1,378,866 4.0
Telecommunications 1,237,933 3.6
Utilities 430,221 1.2
Transportation 339,469 1.0
----------- ------
Total Investments 34,195,749 99.5
Cash and receivables, net of liabilities 162,998 0.5
----------- ------
Net Assets $34,358,747 100.0%
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
WEALTH APPRECIATION STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-99.5%
UNITED STATES INVESTMENTS-64.6%
FINANCE-18.3%
BANKING-8.6%
Bank of America Corp. 9,350 $ 449,735
Citigroup, Inc. 10,625 512,549
Comerica, Inc. 1,325 68,887
Fannie Mae 2,900 139,490
Fifth Third Bancorp 2,100 77,595
Freddie Mac 2,200 125,422
Huntington Bancshares, Inc. 2,700 63,666
JPMorgan Chase & Co. 13,150 552,299
KeyCorp 500 17,840
Mellon Financial Corp. 1,900 65,417
National City Corp. 2,700 97,713
Northern Trust Corp. 1,450 80,185
PNC Financial Services Group, Inc. 400 28,068
Regions Financial Corp. 2,300 76,176
SunTrust Banks, Inc. 1,425 108,671
UBS AG 2,075 227,628
US Bancorp 2,000 61,760
Wachovia Corp. 1,800 97,344
Wells Fargo & Co. 1,600 107,328
------------
2,957,773
FINANCIAL SERVICES-4.3%
Federated Investors, Inc. Cl. B 1,050 33,075
Franklin Resources, Inc. 2,700 234,387
Legg Mason, Inc. 2,950 293,584
Lehman Brothers Holdings, Inc. 750 48,863
MBIA, Inc. 700 40,985
Merrill Lynch & Co., Inc. 5,175 359,973
Morgan Stanley 700 44,247
Nasdaq Stock Market, Inc. (a) 2,300 68,770
NYSE Group, Inc. (a) 1,050 71,904
Prudential Financial, Inc. 150 11,655
The Goldman Sachs Group, Inc. 1,600 240,688
Waddell & Reed Financial, Inc. Cl. A 900 18,504
------------
1,466,635
INSURANCE-5.4%
American International Group, Inc. 8,150 481,258
Genworth Financial, Inc. Cl. A 1,925 67,067
MetLife, Inc. 1,825 93,458
Old Republic International Corp. 1,600 34,192
The Allstate Corp. 875 47,889
The Chubb Corp. 1,400 69,860
The Hartford Financial
Services Group, Inc. 1,175 99,405
The St. Paul Travelers Cos., Inc. 2,600 115,908
Torchmark Corp. 1,225 74,382
UnitedHealth Group, Inc. 4,150 185,837
UnumProvident Corp. 2,700 48,951
WellPoint, Inc. (a) 7,500 545,774
------------
1,863,981
------------
6,288,389
TECHNOLOGY / ELECTRONICS-10.7%
DATA PROCESSING-6.3%
Agere System, Inc. (a) 2,000 29,400
Apple Computer, Inc. (a) 8,550 488,375
Arrow Electronics, Inc. (a) 1,350 43,470
Electronic Data Systems Corp. 2,600 62,556
EMC Corp. (a) 3,300 36,201
Google, Inc. Cl. A (a) 1,325 555,611
Hewlett-Packard Co. 5,100 161,568
International Business Machines Corp. 950 72,979
Microsoft Corp. 2,625 61,163
Network Appliance, Inc. (a) 5,600 197,680
Sanmina-SCI Corp. (a) 7,800 35,880
Solectron Corp. (a) 11,500 39,330
Tech Data Corp. (a) 1,300 49,803
Yahoo!, Inc. (a) 10,525 347,325
------------
2,181,341
ELECTRICAL & ELECTRONICS-3.5%
ADC Telecommunications, Inc. (a) 1,300 21,918
Broadcom Corp. Cl. A (a) 10,400 312,520
Cisco Systems, Inc. (a) 2,200 42,966
Corning, Inc. (a) 12,900 312,051
Juniper Networks, Inc. (a) 8,200 131,118
QUALCOMM, Inc. 8,550 342,599
Tellabs, Inc. (a) 3,300 43,923
------------
1,207,095
ELECTRONIC COMPONENTS & INSTRUMENTS-0.9%
Advanced Micro Devices, Inc. (a) 10,800 263,736
Nvidia Corp. (a) 1,700 36,193
------------
299,929
------------
3,688,365
ENERGY-6.1%
ENERGY EQUIPMENT & SERVICES-2.8%
Baker Hughes, Inc. 1,075 87,989
ENSCO International, Inc. 1,200 55,224
GlobalSantaFe Corp. 2,900 167,475
Halliburton Co. 6,565 487,188
3
WEALTH APPRECIATION STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Rowan Cos., Inc. 1,300 $ 46,267
Schlumberger Ltd. 1,600 104,176
------------
948,319
ENERGY SOURCES-3.3%
ChevronTexaco Corp. 3,775 234,277
ConocoPhillips 2,300 150,719
Exxon Mobil Corp. 10,725 657,978
Marathon Oil Corp. 1,000 83,300
Occidental Petroleum Corp. 200 20,510
------------
1,146,784
------------
2,095,103
CONSUMER CYCLICAL-5.7%
APPLIANCES-HOUSEHOLD/ DURABLES-0.1%
Newell Rubbermaid, Inc. 1,400 36,162
BROADCASTING & PUBLISHING-1.5%
CBS Corp. Cl. B 3,075 83,179
Comcast Corp. Cl. A (a) 1,000 32,740
Comcast Corp. Special Cl. A (a) 2,750 90,145
Liberty Media Holding Corp. Cl. A (a) 660 18,708
The Walt Disney Co. 2,000 60,000
Time Warner, Inc. 9,300 160,890
Viacom, Inc. Cl. B (a) 1,475 52,864
------------
498,526
BUSINESS & PUBLIC SERVICES-0.1%
Interpublic Group of Cos., Inc. (a) 4,200 35,070
LEISURE & TOURISM-1.7%
Hilton Hotels Corp. 2,600 73,528
Host Marriott Corp. 2,566 56,118
Las Vegas Sands Corp. (a) 1,150 89,539
McDonald's Corp. 8,500 285,599
Starwood Hotels & Resorts Worldwide, Inc. 1,150 69,391
------------
574,175
MERCHANDISING-2.1%
eBay, Inc. (a) 4,850 142,057
Limited Brands, Inc. 2,500 63,975
Lowe's Cos., Inc. 3,350 203,245
Office Depot, Inc. (a) 2,200 83,600
Target Corp. 4,600 224,802
------------
717,679
RECREATION & OTHER CONSUMER-0.1%
Mattel, Inc. 3,100 51,181
TEXTILES & APPAREL-0.1%
Jones Apparel Group, Inc. 1,500 47,685
------------
1,960,478
MEDICAL-4.7%
HEALTH & PERSONAL CARE-4.7%
Amgen, Inc. (a) 550 35,877
Caremark Rx, Inc. 5,225 260,571
Eli Lilly & Co. 1,150 63,561
Genentech, Inc. (a) 5,050 413,089
Gilead Sciences, Inc. (a) 3,670 217,117
Medco Health Solutions, Inc. (a) 1,450 83,056
Merck & Co., Inc. 4,825 175,775
Pfizer, Inc. 14,500 340,315
Ventas, Inc. 1,050 35,574
------------
1,624,935
CONSUMER STAPLES-4.7%
BEVERAGES & TOBACCO-1.2%
Altria Group, Inc. 3,050 223,962
Kraft Foods, Inc. Cl. A 800 24,720
The Coca-Cola Co. 2,550 109,701
UST, Inc. 1,000 45,190
------------
403,573
FOOD & HOUSEHOLD PRODUCTS-3.5%
Colgate-Palmolive Co. 1,300 77,870
ConAgra Foods, Inc. 3,100 68,541
Del Monte Foods Co. 1,500 16,845
General Mills, Inc. 1,200 61,992
Kellogg Co. 1,500 72,645
Safeway, Inc. 2,300 59,800
The Clorox Co. 1,000 60,970
The Kroger Co. 3,000 65,580
The Procter & Gamble Co. 10,525 585,190
Walgreen Co. 1,750 78,470
Whole Foods Market, Inc. 1,100 71,104
------------
1,219,007
------------
1,622,580
CONSTRUCTION & HOUSING-4.5%
REAL ESTATE-4.5%
Alexandria Real Estate Equities, Inc. 720 63,850
AMB Property Corp. 300 15,165
Archstone-Smith Trust 900 45,783
AvalonBay Communities, Inc. 650 71,902
BioMed Realty Trust, Inc. 400 11,976
Boston Properties, Inc. 775 70,059
Brookfield Properties Co. 900 28,953
4
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Camden Property Trust 875 $ 64,356
Corporate Office Properties Trust 1,450 61,016
Developers Diversified Realty Corp. 555 28,960
Digital Realty Trust, Inc. 1,400 34,566
Equity Inns, Inc. 1,350 22,356
Equity Office Properties Trust 650 23,732
Equity Residential 1,550 69,332
Essex Property Trust, Inc. 225 25,124
Federal Realty Investment Trust 525 36,750
FelCor Lodging Trust, Inc. 1,200 26,088
First Potomac Realty Trust 550 16,385
Forest City Enterprises, Inc. Cl. A 400 19,964
General Growth Properties, Inc. 1,250 56,325
Kimco Realty Corp. 1,600 58,384
LaSalle Hotel Properties 400 18,520
Maguire Properties, Inc. 1,450 50,997
Mid-America Apartment Communities, Inc. 625 34,844
ProLogis 1,850 96,421
Public Storage, Inc. 975 74,002
Reckson Associates Realty Corp. 275 11,380
Regency Centers Corp. 675 41,951
Simon Property Group, Inc. 1,275 105,748
SL Green Realty Corp. 350 38,315
Strategic Hotel Capital, Inc. 1,700 35,258
Sunstone Hotel Investors, Inc. 1,375 39,958
Tanger Factory Outlet Centers, Inc. 650 21,041
Taubman Centers, Inc. 750 30,675
The Macerich Co. 175 12,285
United Dominion Realty Trust, Inc. 550 15,406
Vornado Realty Trust 725 70,723
------------
1,548,550
CAPITAL EQUIPMENT-4.2%
AEROSPACE & DEFENSE-2.0%
Lockheed Martin Corp. 700 50,218
Northrop Grumman Corp. 1,525 97,692
Rockwell Collins, Inc. 1,400 78,218
The Boeing Co. 5,825 477,126
------------
703,254
AUTOMOBILES-0.4%
Autoliv, Inc. 1,225 69,298
BorgWarner, Inc. 800 52,080
------------
121,378
INDUSTRIAL COMPONENTS-0.2%
Eaton Corp. 800 60,320
MULTI-INDUSTRY-1.6%
Crane Co. 700 29,120
Emerson Electric Co. 850 71,239
General Electric Co. 7,100 234,016
SPX Corp. 800 44,760
Textron, Inc. 1,350 124,443
United Technologies Corp. 850 53,907
------------
557,485
------------
1,442,437
TELECOMMUNICATIONS-2.5%
American Tower Corp. Cl. A (a) 700 21,784
AT&T, Inc. 9,300 259,377
BellSouth Corp. 4,900 177,380
Crown Castle International Corp. (a) 2,000 69,080
Embarq Corp. (a) 290 11,887
Sprint Nextel Corp. 5,800 115,942
Verizon Communications, Inc. 6,075 203,452
------------
858,902
INDUSTRIAL COMMODITIES-1.6%
CHEMICAL-1.0%
E.I. Du Pont de Nemours & Co. 1,100 45,760
Hercules, Inc. (a) 1,600 24,416
Monsanto Co. 2,205 185,639
PPG Industries, Inc. 1,125 74,250
The Lubrizol Corp. 800 31,880
------------
361,945
FOREST & PAPER-0.4%
Kimberly-Clark Corp. 1,500 92,550
Smurfit-Stone Container Corp. (a) 2,800 30,632
------------
123,182
MISCELLANEOUS MATERIALS-0.2%
Crown Holdings, Inc. (a) 1,700 26,469
Owens-Illinois, Inc. (a) 1,900 31,844
------------
58,313
------------
543,440
UTILITIES-0.8%
ELECTRIC & GAS UTILITY-0.8%
Dominion Resources, Inc. 1,300 97,227
Entergy Corp. 550 38,913
Northeast Utilities 1,600 33,072
Pinnacle West Capital Corp. 1,200 47,892
Wisconsin Energy Corp. 1,200 48,360
------------
265,464
5
WEALTH APPRECIATION STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
TRANSPORTATION-0.8%
TRANSPORTATION-ROAD & RAIL-0.8%
CSX Corp. 2,000 $ 140,880
Norfolk Southern Corp. 1,800 95,796
Union Pacific Corp. 300 27,888
------------
264,564
Total United States Investments
(cost $20,474,054) 22,203,207
FOREIGN INVESTMENTS-34.9%
AUSTRALIA-1.1%
Centro Properties Group 2,181 10,841
DB Rreef Trust 32,707 35,590
General Property Trust 17,800 57,338
Macquarie CountryWide Trust 7,591 10,261
Macquarie Goodman Group 7,107 31,677
QBE Insurance Group Ltd. 4,516 68,656
Rinker Group Ltd. (a) 2,279 27,601
Stockland 4,852 25,309
Westfield Group 9,669 124,482
------------
391,755
BELGIUM-0.1%
Fortis 1,400 47,666
BERMUDA-0.5%
Nabors Industries Ltd. (a) 5,500 185,845
BRAZIL-0.5%
Cia de Bebidas das Americas (ADR) 600 24,750
Petroleo Brasileiro, SA (ADR) 500 44,655
Petroleo Brasileiro, SA (ADR) (a) 1,200 95,808
------------
165,213
CANADA-0.7%
Allied Properties Real Estate
Investment Trust 1,300 20,636
Boardwalk Real Estate Investment Trust 1,075 24,701
Borealis Retail Real Estate
Investment Trust 2,050 29,842
Canadian Apartment Properties Real Estate 600 8,820
Canadian Natural Resources Ltd. 650 35,938
Canadian Real Estate Investment Trust 600 12,954
Cominar Real Estate Investment Trust 700 12,140
Dundee Real Estate Investment Trust 600 15,157
H&R Real Estate Investment Trust 1,350 27,791
RioCan Real Estate Investment Trust 1,650 31,986
Summit Real Estate Investment Trust 950 21,786
------------
241,751
FINLAND-0.1%
Citycon Oyj 3,360 15,514
FRANCE-4.7%
Arcelor 1,400 67,756
Arkema (a) 40 1,561
Assurance Generales de France 800 94,307
Bail Investissement Fonciere 850 53,571
BNP Paribas, SA 1,722 164,665
CapGemini, SA 2,836 161,734
Cie Generale d'Optique Essilor
International, SA 417 41,943
Credit Agricole, SA 2,260 85,767
European Aeronautic Defence and Space Co. 2,090 59,954
Klepierre 675 78,158
Renault, SA 1,400 150,230
Sanofi Aventis 1,474 143,613
Societe Generale 600 88,096
Societe Television Francaise 2,280 74,284
Total, SA 1,600 105,107
Unibail 875 152,447
VINCI, SA 954 98,104
------------
1,621,297
GERMANY-1.9%
Commerzbank AG 2,441 88,387
Continental AG 1,100 112,388
Deutsche Wohnen AG (a) 50 15,157
E.On AG 1,000 114,925
IVG Immobilien AG 500 15,325
MAN AG 700 50,664
Muenchener Rueckversicherungs AG 700 95,519
RWE AG 600 49,832
SAP AG 562 118,086
------------
660,283
HONG KONG-0.8%
Kerry Properties Ltd. 22,128 75,588
New World Development Co., Ltd. 40,900 67,409
Sino Land Co., Ltd. 55,478 88,736
Sun Hung Kai Properties Ltd. 3,700 37,771
------------
269,504
HUNGARY-0.2%
MOL Hungarian Oil and Gas Plc 600 61,685
IRELAND-0.2%
CRH Plc 2,526 82,301
6
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
ISRAEL-0.8%
Teva Pharmaceutical Industries Ltd. (ADR) 9,000 $ 284,309
ITALY-0.9%
Buzzi Unicem SpA 2,000 45,836
Eni S.p.A 4,281 125,746
Luxottica Group SpA 1,714 46,457
UniCredito Italiano SpA 10,039 78,516
------------
296,555
JAPAN-7.2%
Canon, Inc. 3,900 191,136
Honda Motor Co., Ltd. 1,200 38,117
Hoya Corp. 1,200 42,720
Japan Real Estate Investment Corp. 5 44,549
Japan Retail Fund Investment Corp. 5 39,336
Japan Tobacco, Inc. 30 109,560
JFE Holdings, Inc. 3,500 148,602
Komatsu Ltd. 2,000 39,798
Leopalace21 Corp. 300 10,335
Mitsubishi UFJ Financial Group, Inc. 10 140,179
Mitsui & Co., Ltd. 12,000 169,666
Mitsui Chemicals, Inc. 8,500 55,550
Mitsui Fudosan Co., Ltd. 6,900 149,957
Mitsui O.S.K. Lines Ltd. 11,000 74,905
Nippon Building Fund, Inc. 12 116,273
Nippon Telegraph & Telephone Corp. 12 58,591
Nitto Denko Corp. 900 64,120
Nomura Holdings, Inc. 8,300 155,878
ORIX Corp. 600 146,407
Sony Corp. 700 30,863
Sumitomo Heavy Industries Ltd. 5,000 46,200
Sumitomo Mitsui Financial Group, Inc. 23 243,566
Sumitono Realty & Development Co., Ltd. 4,000 98,701
Takeda Pharmaceutical Co., Ltd. 900 56,023
Toyota Motor Corp. 3,800 198,604
------------
2,469,636
MEXICO-0.6%
America Movil, SA de CV Series L (ADR) 6,550 217,853
NETHERLANDS-1.1%
ING Groep NV 8,637 339,067
Rodamco Europe NV 205 20,089
Wereldhave NV 125 12,143
------------
371,299
NORWAY-0.3%
Norsk Hydro ASA 3,572 94,737
PEOPLE'S REPUBLIC OF CHINA-0.3%
China Petroleum & Chemical Corp. Cl. H 76,000 43,577
China Shenhua Energy Co., Ltd. Cl. H 21,000 38,965
PertroChina Co., Ltd. Cl. H 24,000 25,649
------------
108,191
RUSSIA-0.1%
LUKOIL (ADR) 576 48,154
SINGAPORE-0.3%
Ascendas Real Estate Investment Trust (a) 22,595 27,493
CapitaMall Trust (a) 12,800 17,135
Flextronics International Ltd. (a) 6,200 65,844
------------
110,472
SOUTH AFRICA-0.2%
Naspers Ltd. 1,122 19,070
Standard Bank Group Ltd. 4,000 42,752
------------
61,822
SOUTH KOREA-0.6%
Kookmin Bank 800 65,914
POSCO 320 85,932
Samsung Electronics Co., Ltd. 80 50,777
------------
202,623
SPAIN-0.6%
Banco Bilbao Vizcaya 5,051 103,936
Inmobiliaria Urbis, SA 600 15,617
Repsol YPF, SA 3,000 85,914
------------
205,467
SWEDEN-0.5%
Atlas Copco AB CI. A 3,817 106,291
Svenska Cellulosa AB CI. B 1,100 45,414
------------
151,705
SWITZERLAND-3.4%
ABB Ltd. 7,655 99,393
Alcon, Inc. 3,075 303,040
Credit Suisse Group 3,945 220,100
Nestle, SA 262 82,140
Nobel Biocare Holding AG 168 39,821
Novartis AG 1,742 94,010
Roche Holding AG 882 145,541
UBS AG 1,508 165,073
------------
1,149,118
TAIWAN-0.8%
Foxconn Technology Co., Ltd. 5,000 40,115
High Tech Computer Corp. 3,000 82,464
7
WEALTH APPRECIATION STRATEGY PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Largan Precision Co., Ltd. 1,000 $ 21,376
Quanta Computer, Inc. (GDR) 5,200 41,597
Taiwan Semiconductor
Manufacturing Co., Ltd. (ADR) 7,828 71,860
United Microelectronics Corp. 37,000 21,975
------------
279,387
UNITED KINGDOM-6.4%
AstraZeneca Plc 1,300 78,171
Aviva Plc 7,500 106,146
BAE Systems Plc 8,400 57,385
Barclays Plc 9,100 103,160
BG Group Plc 3,764 50,241
Billiton Plc 4,455 86,675
BP Plc 4,500 52,177
British American Tobacco Plc 7,785 196,005
British Land Co. Plc 4,281 99,849
Brixton Plc 750 6,636
Capital & Regional Plc 2,138 39,906
Derwent Valley Holdings Plc 500 14,481
Friends Provident Plc 13,180 43,582
GlaxoSmithKline Plc 1,300 36,279
Hammerson Plc 1,350 29,512
HBOS Plc 5,730 99,439
J. Sainsbury Plc 14,200 87,698
Land Securities Group Plc 3,157 104,614
Liberty International Plc 1,200 23,605
Man Group Plc 1,079 50,796
Marks & Spencer Group Plc 7,142 77,457
Persimmon Plc 2,000 45,581
Prudential Plc 5,107 57,750
Rio Tinto Plc 2,586 136,169
Royal Bank of Scotland Group Plc 3,900 128,018
SABMiller Plc 2,547 45,852
Slough Estates Plc 2,400 27,101
Standard Chartered Plc 1,758 42,895
Vodafone Group Plc 48,200 102,587
WPP Group Plc 2,067 24,986
Xstrata Plc 3,774 143,647
------------
2,198,400
Total Foreign Investments
(cost $10,534,066) 11,992,542
Total Common Stocks
(cost $31,008,120) 34,195,749
TOTAL INVESTMENTS-99.5%
(cost $31,008,120) 34,195,749
Other assets less liabilities-0.5% 162,998
NET ASSETS-100% $34,358,747
FINANCIAL FUTURES CONTRACTS PURCHASED (SEE NOTE D)
VALUE AT
NUMBER OF EXPIRATION ORIGINAL JUNE 30, UNREALIZED
TYPE CONTRACTS MONTH VALUE 2006 APPRECIATION
- -------------------------------------------------------------------------------
EURO STOXX September
50 Index 1 2006 $ 43,786 $ 46,839 $ 3,053
(a) Non-income producing security.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
See Notes to Financial Statements.
8
WEALTH APPRECIATION STRATEGY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $31,008,120) $ 34,195,749
Foreign cash, at value (cost $112,947) 114,412(a)
Receivable for investment securities sold 308,646
Dividends receivable 54,788
Receivable for variation margin on futures contracts 1,867
Receivable due from Adviser 655
Total assets 34,676,117
LIABILITIES
Due to custodian 101,081
Payable for capital stock redeemed 96,506
Custodian fee payable 55,247
Payable for investment securities purchased 37,572
Audit fee payable 17,319
Distribution fee payable 6,069
Transfer agent fee payable 119
Accrued expenses 3,457
Total liabilities 317,370
NET ASSETS $ 34,358,747
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,902
Additional paid-in capital 29,941,305
Distributions in excess of net investment income (7,477)
Accumulated net realized gain on investment and foreign
currency transactions 1,226,300
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 3,195,717
-------------
$ 34,358,747
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED, $.001
PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- -------------------------------------------------------------------------------
A $ 6,748,560 568,392 $ 11.87
B $ 27,610,187 2,333,267 $ 11.83
(a) An amount equivalent to U.S. $3,390 has been segregated as collateral for
the financial futures contracts outstanding at June 30, 2006.
See Notes to Financial Statements.
9
WEALTH APPRECIATION STRATEGY PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $23,907) $ 372,046
Interest 7,889
Total investment income 379,935
EXPENSES
Advisory fee 113,547
Distribution fee--Class B 35,101
Transfer agency--Class A 131
Transfer agency--Class B 544
Custodian 165,036
Administrative 39,000
Audit 21,133
Printing 9,802
Legal 923
Directors' fees 638
Miscellaneous 2,489
Total expenses 388,344
Less: expenses waived and reimbursed by the Adviser
(see Note B) (143,618)
Net expenses 244,726
Net investment income 135,209
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 1,349,928
Futures 2,809
Foreign currency transactions (4)
Net change in unrealized appreciation/depreciation of:
Investments (556,288)(a)
Futures 3,053
Foreign currency denominated assets and liabilities 5,445
Net gain on investment and foreign currency transactions 804,943
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 940,152
(a) Net of accrued foreign capital gains Taxes of $39.
See Notes to Financial Statements.
10
WEALTH APPRECIATION STRATEGY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
---------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 135,209 $ 54,490
Net realized gain on investment and
foreign currency transactions 1,352,733 572,412
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities (547,790) 2,711,287
Net increase in net assets from operations 940,152 3,338,189
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income
Class A (10,538) (25,300)
Class B -0- (75,981)
Net realized gain on investment and
foreign currency transactions
Class A (150,309) (23,650)
Class B (636,285) (75,981)
CAPITAL STOCK TRANSACTIONS
Net increase 2,257,897 12,528,034
Total increase 2,400,917 15,665,311
NET ASSETS
Beginning of period 31,957,830 16,292,519
End of period (including distributions
in excess of net investment income of
($7,477) and ($132,148), respectively) $34,358,747 $31,957,830
See Notes to Financial Statements.
11
WEALTH APPRECIATION STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Wealth Appreciation Strategy Portfolio (the "Portfolio")
is a series of AllianceBernstein Variable Products Series Fund, Inc. (the
"Fund"). The Portfolio's investment objective is to seek long-term growth of
capital. The Portfolio is diversified as defined under the Investment company
Act of 1940. The Fund was incorporated in the State of Maryland on November 17,
1987, as an open-end series investment company. The Fund offers twenty-three
separately managed pools of assets which have differing investment objectives
and policies. The Portfolio commenced operations on July 1, 2004. 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
12
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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 Fund 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
7. REPURCHASE AGREEMENTS
It is the policy of the Portfolio that its custodian or designated subcustodian
take control of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements. If the seller defaults and the
value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of collateral by the
Portfolio may be delayed or limited.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .65% of the first $2.5 billion,
..55% of the next $2.5 billion and .50% in excess of $5 billion, of the
Portfolio's average daily net assets. The fee is accrued daily and paid monthly.
13
WEALTH APPRECIATION STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Adviser has agreed to waive its fees and bear certain expenses to the
extent necessary to limit total operating expenses on an annual basis to 1.20%
and 1.45% of the daily average net assets for Class A and Class B shares,
respectively. For the six months ended June 30, 2006 the Adviser waived fees
and reimbursed expenses in the amount of $104,618.
Pursuant to the terms of the investment advisory agreement, the Portfolio has
agreed to reimburse the Adviser for the cost of providing the Portfolio with
certain legal and accounting services. Due to the Adviser's agreement to limit
total operating expenses as described above, the Adviser waived reimbursement
for such services in the amount of $39,000 for the six months ended June 30,
2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $25,137, of which $74 and $0, respectively, was paid
to Sanford C. Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates
of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006 were as follows:
PURCHASES SALES
------------- -------------
Investment securities (excluding U.S.
government securities) $12,096,532 $10,044,195
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding futures and
foreign currency transactions) are as follows:
Gross unrealized appreciation $ 3,996,572
Gross unrealized depreciation (808,943)
Net unrealized appreciation $ 3,187,629
14
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
1. FINANCIAL FUTURES CONTRACTS
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse affects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments and the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities hedged or used for cover.
At the time the Portfolio enters into a futures contract, the Portfolio
deposits and maintains as collateral an initial margin with the broker, as
required by the exchange on which the transaction is effected. 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 a contract. 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.
2. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars reflects the total exposure the Portfolio has in that particular
currency contract.
3. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
15
WEALTH APPRECIATION STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
------------ ------------ -------------- --------------
CLASS A
Shares issued in
reinvestment
of dividends and
distributions 13,748 4,644 $ 160,847 $ 48,950
Net increase 13,748 4,644 $ 160,847 $ 48,950
CLASS B
Shares sold 303,218 1,628,590 $ 3,772,773 $17,366,123
Shares issued in
reinvestment
of dividends and
distributions 54,570 14,445 636,285 151,963
Shares redeemed (188,878) (454,754) (2,312,008) (5,039,002)
Net increase 168,910 1,188,281 $ 2,097,050 $12,479,084
NOTE F: RISK INVOLVED IN INVESTING IN THE PORTFOLIO
Foreign Securities Risk--Investing in securities of foreign companies or
foreign governments involves special risks which include changes in foreign
exchange rates and the possibility of future political and economic
developments which could adversely affect the value of such securities.
Moreover, securities of many foreign companies or foreign governments and their
markets may be less liquid and their prices more volatile than those of
comparable U.S. companies or of the U.S. government.
Indemnification of 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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds
and are included in the miscellaneous expenses in the statement of operations.
The Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: DISTRIBUTIONS TO SHAREHOLDERS
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. The tax
character of distributions paid during the fiscal years ended December 31, 2005
and December 31, 2004 were as follows:
2005 2004
----------- -----------
Distributions paid from:
Ordinary income $ 193,961 $ -0-
Net long-term capital gains 6,951 -0-
Total distributions paid $ 200,912 $ -0-
16
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
As of December 31, 2005, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Undistributed ordinary income $ 514,687
Undistributed long-term capital gain 271,849
Accumulated capital and other losses (5,970)(a)
Unrealized appreciation/(depreciation) 3,490,954(b)
Total accumulated earnings/(deficit) $ 4,271,520
(a) Net foreign currency losses and passive foreign investment company losses
incurred after October 31, and within the taxable year are deemed to arise on
the first business day of the Portfolio's next taxable year. For the year ended
December 31, 2005, the Portfolio deferred until January 1, 2006, post-October
foreign currency losses of $3,305, and post-October passive foreign investment
company losses of $2,665.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) are attributable primarily to the tax deferral of
losses on wash sales, the realization for tax purposes of gains/losses on
certain derivative instruments, the tax character of dividends received, and
the realization for tax purposes of unrealized gains/losses on investments in
passive foreign investment companies.
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee with respect to certain AllianceBernstein funds, including certain of the
Fund's portfolios. On September 7, 2004, the Fund's investment advisory
agreement was amended to reflect the reduced advisory fee for those portfolios.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
17
WEALTH APPRECIATION STRATEGY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
On October 2, 2003, a purported class action complaint entitled HINDO, ET AL.
V. ALLIANCEBERNSTEIN GROWTH & INCOME FUND, ET AL. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the HINDO Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled THE ATTORNEY GENERAL OF THE STATE OF
WEST VIRGINIA V. AIM ADVISORS, INC., ET AL. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the HINDO Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and
18
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
makes factual allegations generally similar to those in the Commission Order
and the NYAGOrder. On January 26, 2006, the Adviser, Alliance Holding, and
various unaffiliated defendants filed a Petition for Writ of Prohibition and
Order Suspending Proceedings in West Virginia state court seeking to vacate the
Summary Order and for other relief. On April 12, 2006, respondents' petition
was denied. On May 4, 2006, respondents appealed the court's determination.
On June 22, 2004, a purported class action complaint entitled AUCOIN, ET AL. V.
ALLIANCE CAPITAL MANAGEMENT L.P., ET AL. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
19
WEALTH APPRECIATION STRATEGY PORTFOLIO
FINANCIAL HIGHLIGHTS
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
---------------------------------------
SIX MONTHS JULY 1,
ENDED YEAR ENDED 2004(A) TO
JUNE 30, 2006 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2005 2004
----------- ----------- -----------
Net asset value, beginning of period $11.79 $10.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .06 .04 .01
Net realized and unrealized gain on
investment and foreign currency
transactions .31 1.15 .68
Net increase in net asset value from
operations .37 1.19 .69
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.02) (.05) -0-
Distributions from net realized gain on
investment and foreign currency
transactions (.27) (.04) -0-
Total dividends and distributions (.29) (.09) -0-
Net asset value, end of period $11.87 $11.79 $10.69
TOTAL RETURN
Total investment return based on net
asset value (d) 3.18% 11.22% 6.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,749 $6,538 $5,877
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.19%(e)(f) 1.20% 1.20%(f)
Expenses, before waivers and
reimbursements 2.01%(e)(f) 2.45% 4.33%(f)
Net investment income (c) .97%(e)(f) .42% .25%(f)
Portfolio turnover rate 29% 61% 14%
See footnote summary on page 21.
20
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
---------------------------------------
SIX MONTHS JULY 1,
ENDED YEAR ENDED 2004(A) TO
JUNE 30, 2006 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2005 2004
----------- ----------- -----------
Net asset value, beginning of period $11.74 $10.67 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .05 .02 .03
Net realized and unrealized gain on
investment and foreign currency
transactions .31 1.13 .64
Net increase in net asset value from
operations .36 1.15 .67
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.04) -0-
Distributions from net realized gain on
investment and foreign currency
transactions (.27) (.04) -0-
Total dividends and distributions (.27) (.08) -0-
Net asset value, end of period $11.83 $11.74 $10.67
TOTAL RETURN
Total investment return based on net
asset value (d) 3.11% 10.93% 6.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $27,610 $25,420 $10,416
Ratio to average net assets of:
Expenses, net of waivers and
reimbursements 1.44%(e)(f) 1.45% 1.45%(f)
Expenses, before waivers and
reimbursements 2.26%(e)(f) 2.70% 4.78%(f)
Net investment income (c) .74%(e)(f) .15% .71%(f)
Portfolio turnover rate 29% 61% 14%
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived and reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction of taxes that a shareholder would pay on Portfolio distributions or
redemption of Portfolio shares. Total investment return calculated for a period
of less than one year is not annualized.
(e) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
(f) Annualized.
21
WEALTH APPRECIATION STRATEGY PORTFOLIO
SENIOR OFFICER FEE EVALUATION
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Wealth Appreciation Strategy Portfolio (the "Fund"), prepared
by Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying
such services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE CAPS, REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(2)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
- -------------------------------------------------------------------------------
Blend 65 bp on 1st $2.5 billion Wealth Appreciation
55 bp on next $2.5 billion Strategy Portfolio
50 bp on the balance
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
22
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount which the Adviser
received from the Fund during the Fund's most recently completed fiscal year:
AS A % OF AVERAGE
FUND AMOUNT(3) DAILY NET ASSETS
- -------------------------------------------------------------------------------
Wealth Appreciation Strategy Portfolio(4) $34,500 0.66%
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's most recent fiscal year. The waiver is terminable by the Adviser on
May 1st of each year upon at least 60 days written notice. The gross expense
ratios of the Fund during the most recently completed fiscal year are also
listed below.
EXPENSE CAP PURSUANT TO GROSS
EXPENSE LIMITATION EXPENSE
FUND UNDERTAKING RATIO FISCAL YEAR END
- -------------------------------------------------------------------------------
Wealth Appreciation Class A 1.20% 4.33% December 31
Strategy Portfolio Class B 1.45% 4.78%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. However, with respect to the Fund, the Adviser
represented that there are no institutional products which have a substantially
similar investment style as the Fund.
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
(3) The Fund commenced operations on July 1, 2004. Therefore, the
reimbursement amount to the Advisor is for a 6 month period.
(4) The expense reimbursement has been waived by the Adviser.
23
WEALTH APPRECIATION STRATEGY PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc., an analytical service that is not affiliated with the Adviser,
compared the fee charged to the Fund with fees charged to other investment
companies linked to variable insurance for similar services by other investment
advisers. Lipper's analysis included the Fund's ranking with respect to the
proposed management fee relative to the Lipper group median at the approximate
current asset level of the Fund.(5)
EFFECTIVE LIPPER
MANAGEMENT GROUP
FUND FEE MEDIAN RANK
- -------------------------------------------------------------------------------
Wealth Appreciation Strategy Portfolio 0.650 0.908 2/8
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(6) and Lipper Expense Universe(7). Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objections with a similar load type as the subject
Fund. The results of that analysis are set forth below:
LIPPER LIPPER LIPPER LIPPER
EXPENSE UNIVERSE UNIVERSE GROUP GROUP
FUND RATIO (%)(8) MEDIAN (%) RANK MEDIAN (%) RANK
- -------------------------------------------------------------------------------
Wealth Appreciation
Strategy Portfolio 1.200 0.934 11/14 1.127 6/8
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. Based on the information
provided, the Adviser did not earn a profit during calendar 2004 primarily as a
result of the Adviser having to reimburse the Fund for additional expenses
incurred above the Fund's expense cap limitation.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide
(5) It should be noted that "effective management fee" is calculated by Lipper
using the Fund's contractual management fee rate at a hypothetical asset level.
The hypothetical asset level is based on the combined net assets of all classes
of the Fund, rounded up to the next $25 million. Lipper's total expense ratio
information is based on the most recent annual report except as otherwise
noted. A ranking of "1" means that the Fund has the lowest effective fee rate
in the Lipper peer group. It should be noted that the effective management fee
rate does not reflect the fee waiver or expense reimbursement that effectively
reduce the contractual fee rates. In addition, the effective management fee
rate does not reflect the expense reimbursements made by the Fund to the
Adviser for the provision of administrative services, which have an adverse
effect on the expense ratio of the Fund.
(6) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: variable product, fund type, investment
classification/objective, load type and similar 12b-1/non-12b-1 service fees,
asset (size) comparability, and expense components and attributes. A Lipper
Expense Group will typically consist of seven to twenty funds.
(7) Except for asset (size) comparability and load type, Lipper uses the same
criteria for selecting a Lipper Expense Group when selecting a Lipper Expense
Universe. Unlike the Lipper Expense Group, the Lipper Expense Universe allows
for the same adviser to be represented by more than just one fund.
(8) Most recent fiscal year end Class A share total expense ratio.
24
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
transfer agent, distribution, and brokerage related services to the Fund and
receive transfer agent fees, Rule 12b-1 payments and commissions for providing
brokerage services. In addition, the Adviser benefits from soft dollar
arrangements which offset expenses the Adviser would otherwise incur.
Additional information regarding distribution related fees can be found in the
prospectus of the Fund.
The Fund has adopted a distribution plan for Class B shares pursuant to Rule
12b-1 under the Investment Company Act of 1940. During the fiscal year ended
December 31, 2004, ABIRM received the amount set forth below in Rule 12b-1 fees
from the Fund:
FUND 12B-1 FEE RECEIVED
- -------------------------------------------------------------------------------
Wealth Appreciation Strategy Portfolio $6,185
The Adviser makes payments for distribution services to ABIRM, which in turn
may pay part or all of such compensation to brokers and other persons for their
distribution assistance. During the fiscal year ended December 31, 2004, the
Adviser determined that it made the following payments on behalf of the Fund to
ABIRM:
ADVISER
PAYMENTS TO
FUND ABIRM
- -------------------------------------------------------------------------------
Wealth Appreciation Strategy Portfolio $119,088
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(9) For the fiscal year ended December
31, 2004, the Fund paid a fee of $409 to AGIS. AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC, and/or its U.K. based affiliate, Sanford C.
Bernstein Ltd., (collectively "SCB"), and paid commissions during the Fund's
recent fiscal year. The Adviser represented that SCB's profitability from
business conducted with the Fund is comparable to the profitability of SCB's
dealings with other similar third party clients. In the ordinary course of
business, SCB receives and pays liquidity rebates from electronic
communications networks ("ECNs") derived from trading for its clients,
including the Fund. These credits and charges are not being passed on to any
SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of
(9) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
25
WEALTH APPRECIATION STRATEGY PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND
_______________________________________________________________________________
scale were being passed on to the shareholders. It is contemplated that
additional work will be performed to determine if the benefits of economies of
scale or scope are being passed to shareholders by the Adviser. In the
meantime, it is clear that to the extent the Fund's assets exceed the initial
breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
The information prepared by Lipper showed the 1 year performance rankings of
the Fund(10) relative to its Lipper Performance Group(11) and Lipper
Performance Universe(12) for the period ended September 30, 2005.
WEALTH APPRECIATION STRATEGY PORTFOLIO GROUP UNIVERSE
- -------------------------------------------------------------------------------
1 year 6/8 10/14
Set forth below are the 1 year and since inception performance returns of the
Fund (in bold)(13) versus its benchmark(14).
PERIODS ENDING SEPTEMBER 30, 2005
ANNUALIZED PERFORMANCE
- -------------------------------------------------------------------------------
FUND 1 YEAR SINCE INCEPTION
- -------------------------------------------------------------------------------
WEALTH APPRECIATION STRATEGY PORTFOLIO 16.64 15.01
S&P 500 Index 12.25 11.82
MSCI EAFE Index (Net) 25.80 24.93
70% S&P 500 Index, 30% MSCI EAFE Index (Net) 16.31 15.75
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
(10) The performance rankings are for the Class A shares of the Fund.
(11) The Lipper Performance Group is identical to the Lipper Expense Group.
(12) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective, regardless of asset size
or primary distribution channel.
(13) The performance returns are for the Class A shares of the Fund.
(14) The Adviser provided Fund and benchmark performance return information for
periods through September 30, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
26
ALLIANCEBERNSTEIN
VARIABLE PRODUCTS SERIES FUND, INC.
JUNE 30, 2006
SEMI-ANNUAL REPORT
ALLIANCEBERNSTEIN GLOBAL RESEARCH GROWTH PORTFOLIO
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
INVESTMENT PRODUCTS OFFERED
o ARE NOT FDIC INSURED
o MAY LOSE VALUE
o ARE NOT BANK GUARANTEED
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 ALLIANCEBERNSTEIN'S WEB SITE AT
WWW.ALLIANCEBERNSTEIN.COM OR GO TO THE SECURITIES AND EXCHANGE COMMISSION'S
(THE "COMMISSION") WEB SITE AT WWW.SEC.GOV, OR CALL ALLIANCEBERNSTEIN AT (800)
227-4618.
THE FUND FILES ITS COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE COMMISSION
FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q. THE FUND'S
FORMS N-Q ARE AVAILABLE ON THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE FUND'S
FORMS N-Q MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE
ROOM IN WASHINGTON, DC; INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE
ROOM MAY BE OBTAINED BY CALLING (800) SEC-0330.
ALLIANCEBERNSTEINR AND THE AB LOGO ARE REGISTERED TRADEMARKS AND SERVICE MARKS
USED BY PERMISSION OF THE OWNER, ALLIANCEBERNSTEIN L.P.
GLOBAL RESEARCH GROWTH PORTFOLIO
FUND EXPENSES
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
ACTUAL EXPENSES
The first line of each class' table below provides information about actual
account values and actual expenses. You may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
The estimate of expenses does not include fees or other expenses of any
variable insurance product. If such expenses were included, the estimate of
expenses you paid during the period would be higher and your ending account
value would be lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each class' table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed annual rate of return of 5% before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the Fund and other funds by comparing
this 5% hypothetical example with the 5% hypothetical examples that appear in
the shareholder reports of other funds. The estimate of expenses does not
include fees or other expenses of any variable insurance product. If such
expenses were included, the estimate of expenses you paid during the period
would be higher and your ending account value would be lower.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the second line of each 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 ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
GLOBAL RESEARCH GROWTH PORTFOLIO JANUARY 1, 2006 JUNE 30, 2006 DURING PERIOD* EXPENSE RATIO*
- -------------------------------------------------------------------------------------------------------------
CLASS A
Actual $ 1,000 $ 1,036.20 $ 6.06 1.20%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,018.84 $ 6.01 1.20%
CLASS B
Actual $ 1,000 $ 1,034.60 $ 7.31 1.45%
Hypothetical (5% return
before expenses) $ 1,000 $ 1,017.60 $ 7.25 1.45%
* Expenses are equal to each class' annualized expense ratios, multiplied by
the average account value over the period, multiplied by 181/365 (to reflect
the one-half year period).
1
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
TEN LARGEST HOLDINGS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
Halliburton Co. $ 267,156 2.9%
Citigroup, Inc. 264,355 2.8
UBS AG 226,593 2.4
Credit Suisse Group 222,387 2.4
American International Group, Inc. 218,485 2.3
Nomura Holdings, Inc. 178,415 1.9
NOBLE ENERGY, INC. 176,943 1.9
JPMorgan Chase & Co. 163,800 1.7
The Procter & Gamble Co. 155,680 1.7
Legg Mason, Inc. 149,280 1.6
----------- ----
$ 2,023,094 21.6%
SECTOR DIVERSIFICATION
June 30, 2006 (unaudited)
SECTOR U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
Finance $ 2,336,951 25.0%
Technology 1,250,193 13.4
Health Care 1,120,870 12.0
Energy 1,087,708 11.6
CONSUMER SERVICES 712,238 7.6
Basic Industry 701,341 7.5
Consumer Staples 561,134 6.0
Capital Goods 500,196 5.3
Consumer Manufacturing 442,635 4.7
Multi-Industry Companies 128,582 1.4
Aerospace & Defense 121,697 1.3
Transportation 74,097 0.8
Utilities 44,818 0.5
----------- -----
Total Investments 9,082,460 97.1
Cash and receivables, net of liabilities 274,495 2.9
----------- -----
Net Assets $ 9,356,955 100.0%
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. 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 Fund's prospectus.
2
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
COUNTRY DIVERSIFICATION
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COUNTRY U.S. $ VALUE PERCENT OF NET ASSETS
------------- ---------------------
United States $ 4,599,977 49.2%
Switzerland 953,103 10.2
Japan 880,712 9.4
United Kingdom 695,756 7.4
FRANCE 306,733 3.3
Brazil 264,146 2.8
Australia 183,619 2.0
Bermuda 183,309 1.9
China 120,149 1.3
Russia 109,358 1.2
Norway 99,644 1.1
Taiwan 96,976 1.0
Other * 588,978 6.3
----------- -----
Total Investments 9,082,460 97.1
Cash and receivables, net of liabilities 274,495 2.9
----------- -----
Net Assets $ 9,356,955 100.0%
* The Portfolio's country breakdown is expressed as a percentage of net
assets and may vary over time. "Other" represents less than 1% weightings in
the following countries: Austria, Cayman Islands, Germany, Greece, Hong Kong,
India, Ireland, Israel, Italy, Mexico, Netherlands, South Korea and Sweden.
3
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- ------------------------------------------------------------
COMMON STOCKS & OTHER
INVESTMENTS-97.1%
FINANCE-25.0%
BANKING - MONEY
CENTER-8.7%
Credit Suisse Group 3,986 $ 222,387
HSBC Holdings Plc 5,863 103,161
JPMorgan Chase & Co. 3,900 163,800
Mitsubishi UFJ Financial
Group, Inc. 7 98,126
UBS AG 2,070 226,593
-------------
814,067
-------------
BANKING - REGIONAL-0.8%
Macquarie Bank Ltd. 1,419 72,637
-------------
BROKERAGE & MONEY
MANAGEMENT-5.5%
Banco Itau Holdings
Finameceria, SA pfd. (a) 1,300 37,723
Franklin Resources, Inc. 700 60,767
Legg Mason, Inc. 1,500 149,280
Nomura Holdings, Inc. 9,500 178,415
The Goldman Sachs Group,
Inc. 600 90,258
-------------
516,443
-------------
INSURANCE-5.4%
American International Group,
Inc. 3,700 218,485
Axis Capital Holdings Ltd. 1,100 31,471
Prudential Plc 8,416 95,168
QBE Insurance Group Ltd. 4,300 65,372
Swiss Reinsurance 1,305 91,049
-------------
501,545
-------------
MISCELLANEOUS-4.6%
American Express Co. 2,500 133,050
Citigroup, Inc. 5,480 264,355
State Street Corp. 600 34,854
-------------
432,259
-------------
2,336,951
-------------
TECHNOLOGY-13.4%
COMMUNICATION
EQUIPMENT-2.3%
Alcatel, SA 1,157 14,594
Cisco Systems, Inc. (a) 3,000 58,590
Juniper Networks, Inc. (a) 900 14,391
Motorola, Inc. 2,900 58,435
QUALCOMM, Inc. 1,800 72,126
-------------
218,136
-------------
COMMUNICATION
SERVICES-0.1%
Comstar United Telesystems
(GDR) (b) 1,760 10,208
-------------
COMPUTER HARDWARE/
STORAGE-1.9%
Apple Computer, Inc. (a) 1,100 62,832
International Business
Machines Corp. (IBM) 600 46,092
NEC Corp. 6,000 32,001
Sun Microsystems, Inc. (a) 7,800 32,370
-------------
173,295
-------------
COMPUTER
PERIPHERALS-0.7%
High Tech Computer Corp. 1,000 27,488
Network Appliance, Inc. (a) 1,000 35,300
-------------
62,788
-------------
COMPUTER SERVICES-1.2%
Alliance Data Systems
Corp. (a) 200 11,764
Cap Gemini, SA 854 48,703
Fiserv, Inc. (a) 600 27,216
Infosys Technologies Ltd.
(ADR) 300 22,923
-------------
110,606
-------------
CONTRACT
MANUFACTURING-0.2%
Hon Hai Precision Industry
Co., Ltd. (GDR) 1,127 13,923
-------------
ELECTRONIC
COMPONENTS-0.4%
AU Optronics Corp. (CSBF),
warrants expiring 5/3/09 11,000 15,576
Largan Precision Co., Ltd. 1,000 21,376
-------------
36,952
-------------
INTERNET
INFRASTRUCTURE-0.2%
Fastweb (a) 403 17,499
-------------
INTERNET MEDIA-1.2%
Google, Inc. Cl. A (a) 207 86,801
Yahoo!, Inc. (a) 900 29,700
-------------
116,501
-------------
SEMICONDUCTOR CAPITAL
EQUIPMENT-0.3%
ASML Holding NV (a) 1,522 30,776
-------------
4
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- ------------------------------------------------------------
SEMICONDUCTOR
COMPONENTS-1.3%
Advanced Micro Devices,
Inc. (a) 700 $ 17,094
Broadcom Corp. Cl. A (a) 1,150 34,558
Hynix Semiconductor, Inc. (a) 760 24,564
Hynix Semiconductor, Inc.
(GDR) (a)(b) 90 2,917
Marvell Technology Group
Ltd . (a) 300 13,299
Samsung Electronics Co.,
Ltd. 23 14,598
Taiwan Semiconductor
Manufacturing Co., Ltd.
(ADR) 2,027 18,613
-------------
125,643
-------------
SOFTWARE-2.2%
Adobe Systems, Inc. (a) 1,000 30,360
BEA Systems, Inc. (a) 2,000 26,180
Microsoft Corp. 3,400 79,220
SAP AG (ADR) 1,300 68,276
-------------
204,036
-------------
MISCELLANEOUS-1.4%
Canon, Inc. 1,350 66,163
Hoya Corp. 1,000 35,600
Keyence Corp. 110 28,067
-------------
129,830
-------------
1,250,193
-------------
HEALTH CARE-12.0%
BIOTECHNOLOGY-1.6%
Genentech, Inc. (a) 1,000 81,800
Gilead Sciences, Inc. (a) 900 53,244
MedImmune, Inc. (a) 400 10,840
-------------
145,884
-------------
DRUGS-5.9%
Allergan, Inc. 500 53,630
AstraZeneca Plc (ADR) 300 17,946
Eli Lilly & Co. 600 33,162
Merck & Co., Inc. 2,100 76,503
Novartis AG 1,051 56,719
Ranbaxy Laboratories Ltd.
(GDR) 1,043 8,073
Roche Holding AG-
Genusschin 591 97,522
Sanofi-Aventis, SA 563 54,853
Shionogi & Co., Ltd. 2,000 35,710
Takeda Pharmaceutical Co.,
Ltd. 500 31,124
Teva Pharmaceutical Industries
Ltd. (ADR) 1,700 53,703
Wyeth 800 35,528
-------------
554,473
-------------
MEDICAL PRODUCTS-1.6%
Alcon, Inc. 650 64,057
Becton Dickinson & Co. 500 30,565
Nobel Biocare Holding AG 215 50,962
-------------
145,584
-------------
MEDICAL SERVICES-2.9%
Caremark Rx, Inc. 600 29,922
Medco Health Solutions,
Inc. (a) 300 17,184
UnitedHealth Group, Inc. 2,000 89,560
WellPoint, Inc. (a) 1,900 138,263
-------------
274,929
-------------
1,120,870
-------------
ENERGY-11.6%
DOMESTIC
PRODUCERS-2.1%
Newfield Exploration Co. (a) 300 14,682
Noble Energy, Inc. 3,776 176,943
-------------
191,625
-------------
INTERNATIONAL-3.2%
Lukoil Holdings (ADR) 1,186 99,150
Norsk Hydro Asa 3,757 99,644
Petroleo Brasileiro, SA
(ADR) (a) 1,300 103,792
-------------
302,586
-------------
OIL SERVICE-6.3%
BJ Services Co. 2,800 104,328
GlobalSantaFe Corp. 1,400 80,850
Halliburton Co. 3,600 267,156
Nabors Industries Ltd. (a) 4,100 138,539
-------------
590,873
-------------
MISCELLANEOUS-0.0%
VeraSun Energy Corp. (a) 100 2,624
-------------
1,087,708
-------------
CONSUMER SERVICES-7.6%
ADVERTISING-0.6%
WPP Group Plc 4,350 52,583
-------------
AIRLINES-0.7%
Continental Airlines, Inc.
Cl. B (a) 1,100 32,780
easyJet Plc (a) 4,728 33,770
-------------
66,550
-------------
BROADCASTING &
CABLE-0.5%
Societe Television Francaise 1 1,533 49,946
-------------
CELLULAR
COMMUNICATIONS-0.7%
America Movil, SA de CV
Series L (ADR) 1,900 63,194
-------------
5
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- ------------------------------------------------------------
ENTERTAINMENT/
LEISURE-0.5%
OPAP, SA 1,438 $ 52,260
-------------
RESTAURANT &
LODGING-1.9%
Accor, SA 783 47,634
Ctrip.com International Ltd.
(ADR) 300 15,315
Hilton Hotels Corp. 2,700 76,356
Punch Taverns Plc 2,210 35,711
-------------
175,016
-------------
RETAIL - GENERAL
MERCHANDISE-2.7%
Kohl's Corp. (a) 900 53,208
Lowe's Cos., Inc. 1,300 78,872
Target Corp. 1,200 58,644
The GAP, Inc. 1,800 31,320
Williams-Sonoma, Inc. 900 30,645
-------------
252,689
-------------
712,238
-------------
BASIC INDUSTRY-7.5%
CHEMICALS-2.9%
Air Products and Chemicals,
Inc. 1,900 121,448
Hitachi Chemical Co., Ltd. 2,000 52,463
Monsanto Co. 1,100 92,609
-------------
266,520
-------------
MINING & METALS-4.6%
Aluminum Corp. of China
Ltd. 42,000 31,375
China Shenhua Energy Co., Ltd.
Cl. H 56,500 104,834
Companhia Vale do Rio Doce
(ADR) 3,900 93,756
Rio Tinto Plc 2,019 106,313
Xstrata Plc 2,589 98,543
-------------
434,821
-------------
701,341
-------------
CONSUMER STAPLES-6.0%
BEVERAGES-1.0%
Companhia de Bebidas das
Americas (ADR) 700 28,875
SABMiller Plc 3,526 63,477
-------------
92,352
-------------
FOOD-1.4%
Nestle, SA 248 77,751
WM. Wrigley Jr. Co. 1,225 55,566
-------------
133,317
-------------
HOUSEHOLD
PRODUCTS-1.7%
The Procter & Gamble Co. 2,800 155,680
-------------
RETAIL - FOOD &
DRUG-0.8%
Walgreen Co. 1,600 71,744
-------------
TOBACCO-1.1%
Altria Group, Inc. 800 58,744
British American Tobacco Plc 1,958 49,297
-------------
108,041
-------------
561,134
-------------
CAPITAL GOODS-5.3%
ELECTRICAL
EQUIPMENT-1.5%
Atlas Copco AB 1,906 53,076
Emerson Electric Co. 1,000 83,810
-------------
136,886
-------------
ENGINEERING &
CONSTRUCTION-0.7%
ABB Ltd. 5,088 66,063
-------------
MACHINERY-0.4%
Komatsu Ltd. 2,000 39,798
-------------
MISCELLANEOUS-2.7%
General Electric Co. 4,300 141,728
Nitto Denko Corp. 200 14,249
United Technologies Corp. 1,600 101,472
-------------
257,449
-------------
500,196
-------------
CONSUMER
MANUFACTURING-4.7%
APPLIANCES-0.2%
Sony Corp. 500 22,045
-------------
AUTO & RELATED-1.9%
Honda Motor Co., Ltd. 1,600 50,824
Toyota Motor Corp. 2,400 125,433
-------------
176,257
-------------
BUILDING RELATED-2.6%
American Standard Cos., Inc. 1,300 56,251
Building Materials Holding
Corp. 300 8,361
CRH Plc 1,566 51,023
Pulte Homes, Inc. 800 23,032
Rinker Group Ltd. 3,766 45,610
Vinci, SA 584 60,056
-------------
244,333
-------------
442,635
-------------
MULTI-INDUSTRY
COMPANIES-1.4%
Danaher Corp. 900 57,888
Mitsui & Co., Ltd. 5,000 70,694
-------------
128,582
-------------
6
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- ------------------------------------------------------------
AEROSPACE &
DEFENSE-1.3%
AEROSPACE-1.3%
Bae Systems Plc 5,824 $ 39,787
The Boeing Co. 1,000 81,910
-------------
121,697
-------------
TRANSPORTATION-0.8%
AIR FREIGHT-0.8%
United Parcel Service, Inc.
Cl. B 900 74,097
-------------
UTILITIES-0.5%
ELECTRIC & GAS
UTILITY-0.3%
Gaz DE France 923 30,947
-------------
TELEPHONE UTILITY-0.2%
Telekom Austria AG 623 13,871
-------------
44,818
-------------
Total Common Stocks
& Other Investments
(cost $8,303,407) 9,082,460
-------------
TOTAL
INVESTMENTS-97.1%
(cost $8,303,407) 9,082,460
Other assets less
liabilities-2.9% 274,495
-------------
NET ASSETS-100% $ 9,356,955
=============
(a) Non-income producing security.
(b) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities are considered liquid and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers. At June 30, 2006, the aggregate market value of these securities
amounted to $13,125 or 0.1% of net assets.
Glossary of Terms:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
pfd. - Preferred Stock
See Notes to Financial Statements.
7
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $8,303,407) $ 9,082,460
Cash 167,979
Foreign cash, at value (cost $70,982) 71,154
Receivable for investment securities sold and foreign
currency contracts 91,999
Receivable due from Adviser 16,707
Receivable for capital stock sold 16,608
Dividends receivable 15,961
-----------
Total assets 9,462,868
-----------
LIABILITIES
Custodian fee payable 56,181
Audit fee payable 22,602
Payable for investment securities purchased and foreign
currency contracts 21,973
Distribution fee payable 1,954
Transfer agent fee payable 131
Accrued expenses 3,072
-----------
Total liabilities 105,913
-----------
NET ASSETS $ 9,356,955
===========
COMPOSITION OF NET ASSETS
Capital stock, at par $ 761
Additional paid-in capital 8,201,857
Undistributed net investment income 24,059
Accumulated net realized gain on investment and foreign
currency transactions 350,999
Net unrealized appreciation of investments and foreign
currency denominated assets
and liabilities 779,279
-----------
$ 9,356,955
===========
NET ASSET VALUE PER SHARE--1 BILLION SHARES OF CAPITAL STOCK AUTHORIZED,
$.001 PAR VALUE
SHARES NET ASSET
CLASS NET ASSETS OUTSTANDING VALUE
- ----------------------------------------------------------------
A $ 125,458 10,169 $ 12.34
B $ 9,231,497 750,468 $ 12.30
See Notes to Financial Statements.
8
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $6,533) $ 85,570
Interest 2,307
-----------
Total investment income 87,877
-----------
EXPENSES
Advisory fee 32,310
Distribution fee--Class B 10,610
Transfer agency--Class A 12
Transfer agency--Class B 788
Custodian 127,335
Administrative 39,000
Audit 20,247
Printing 3,579
Legal 848
Directors' fees 800
MISCELLANEOUS 1,242
-----------
Total expenses 236,771
Less: expenses waived and reimbursed by the Adviser
(see Note B) (174,489)
-----------
Net expenses 62,282
-----------
Net investment gain 25,595
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 357,765
Foreign currency transactions (4,655)
Net change in unrealized appreciation/depreciation of:
Investments (184,519)
Foreign currency denominated assets and liabilities 1,422
-----------
Net gain on investment and foreign currency transactions 170,013
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 195,608
===========
See Notes to Financial Statements.
9
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
SIX MONTHS ENDED MAY 2, 2005(a) TO
JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment gain (loss) $ 25,595 $ (5,366)
Net realized gain on investment and
foreign currency transactions 353,110 152,865
Net change in unrealized appreciation/
depreciation of investments and foreign
currency denominated assets and
liabilities (183,097) 962,376
----------- -----------
Net increase in net assets from operations 195,608 1,109,875
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net realized gain on investment and foreign
currency transactions
Class A (2,040) -0-
Class B (149,106) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 2,128,004 6,074,614
----------- -----------
Total increase 2,172,466 7,184,489
NET ASSETS
Beginning of period 7,184,489 -0-
----------- -----------
End of period (including undistributed net
investment income and net investment loss
of $24,059 and ($1,536), respectively) $ 9,356,955 $ 7,184,489
=========== ===========
(a) Commencement of operations.
See Notes to Financial Statements.
10
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
June 30, 2006 (unaudited)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The AllianceBernstein Global Research Growth Portfolio (the "Portfolio") is a
series of AllianceBernstein Variable Products Series Fund, Inc. (the "Fund").
The Portfolio's investment objective is to seek long-term growth of capital.
The Portfolio is diversified as defined under the Investment Company Act of
1940. The Fund was incorporated in the State of Maryland on November 17, 1987,
as an open-end series investment company. The Fund offers twenty-three
separately managed pools of assets which have differing investment objectives
and policies. The Portfolio commenced operations on May 2, 2005. 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, 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.
Additional information about some of the items discussed in these Notes to
Financial Statements is contained in the Fund's Statement of Additional
Information, which is available upon request. 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.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange 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 mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
NASDAQ Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
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;
securities traded in the over-the-counter market, ("OTC") (but excluding
securities traded on NASDAQ) are valued at the mean of the current bid and
asked prices as reported by the National Quotation Bureau or other comparable
sources; U.S. Government securities and other debt instruments having 60 days
or less remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less; or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, AllianceBernstein L.P. (prior to February
24, 2006 known as Alliance Capital Management L.P.) (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; and
OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund 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 Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
11
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Portfolio's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
3. TAXES
It is the policy of the Portfolio 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.
4. 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 trade date securities are purchased or
sold. Investment gains and losses are determined on the identified cost basis.
The Portfolio amortizes premiums and accretes discounts as adjustments to
interest income.
5. 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 to each Portfolio in proportion to net assets.
Realized and unrealized gains and losses are allocated among the various share
classes based on their relative net assets.
6. DIVIDENDS AND DISTRIBUTIONS
The Portfolio declares and distributes dividends and distributions from net
investment income and net realized gains, respectively, if any, at least
annually. Income dividends and capital gains distributions to shareholders are
recorded on the ex-dividend date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with U.S. generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences do
not require such reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Portfolio pays the
Adviser an advisory fee at an annual rate of .75% of the first $2.5 billion,
..65% of the next $2.5 billion and .60% in excess of $5 billion, of the
Portfolio's average daily net assets. The fee is accrued daily and paid monthly.
The Adviser has agreed to waive its fees and bear certain expenses to the
extent necessary to limit total operating expenses on an annual basis to 1.20%
and 1.45% of the daily average net assets for Class A and Class B shares,
respectively. For the six months ended June 30, 2006 the Adviser waived fees in
the amount of $135,489.
12
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Pursuant to the terms of the investment advisory agreement, the Portfolio has
agreed to reimburse the Adviser for the cost of providing the Portfolio with
certain legal and accounting services. Due to the Adviser's agreement to limit
total operating expenses as described above, the Adviser waived reimbursement
for such services in the amount of $39,000 for the six months ended June 30,
2006.
Brokerage commissions paid on investment transactions for the six months ended
June 30, 2006, amounted to $12,957, none of which was paid to Sanford C.
Bernstein & Co. LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
The Portfolio compensates AllianceBernstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Portfolio. Such compensation amounted to $392 for the six months ended June 30,
2006.
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. (prior to February 24, 2006 known as AllianceBernstein
Investment Research and Management, 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 the Class B shares. The fees are
accrued daily and paid monthly. The Board of Directors 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 and
servicing fees (other than current amounts accrued but not yet paid) would be
owed by the Portfolio to the Distributor.
The Plan also provides that the Adviser may use its own resources to finance
the distribution of the Portfolio's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the six months ended June 30, 2006, were as follows:
PURCHASES SALES
----------- -----------
Investment securities (excluding U.S. government
securities) $ 5,361,450 $ 3,254,497
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes was substantially the
same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Gross unrealized appreciation $ 945,859
Gross unrealized depreciation (166,806)
----------
Net unrealized appreciation $ 779,053
==========
1. FINANCIAL FUTURES CONTRACTS
The Portfolio may buy or sell financial futures contracts for the purpose of
hedging its portfolio against adverse effects of anticipated movements in the
market. The Portfolio bears the market risk that arises from changes in the
value of these financial instruments and the imperfect correlation between
movements in the price of the futures contracts and movements in the price of
the securities hedged or used for cover.
13
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GLOBAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
At the time the Portfolio enters into a futures contract, the Portfolio
deposits and maintains as collateral an initial margin with the broker, as
required by the exchange on which the transaction is effected. 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. 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.
2. FORWARD EXCHANGE CURRENCY CONTRACTS
The Portfolio may enter into forward exchange currency 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 sales commitments
denominated in foreign currencies and for investment purposes. A forward
exchange currency contract is a commitment to purchase or sell a foreign
currency on a future date at a negotiated forward rate. The gain or loss
arising from the difference between the original contract and the closing of
such contract would be included in net realized gain or loss on foreign
currency transactions.
Fluctuations in the value of open forward exchange currency contracts are
recorded for financial reporting purposes as net unrealized appreciation or
depreciation by the Portfolio.
The Portfolio's custodian will place and maintain cash not available for
investment or other liquid assets in a separate account of the Portfolio having
a value at least equal to the aggregate amount of the Portfolio's commitments
under forward exchange currency contracts entered into with respect to position
hedges.
Risks may arise from the potential inability of the counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The face or contract amount, in U.S.
dollars, reflects the total exposure the Portfolio has in that particular
currency contract.
3. OPTION TRANSACTIONS
For hedging and investment purposes, the Portfolio may purchase and write
(sell) put and call options on U.S. and foreign government securities and
foreign currencies that are traded on U.S. and foreign securities exchanges and
over-the-counter markets.
The risk associated with purchasing an option is that the Portfolio pays a
premium whether or not the option is exercised. Additionally, the Portfolio
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of
securities acquired through the exercise of call options is increased by
premiums paid. The proceeds from securities sold through the exercise of put
options are decreased by the premiums paid.
When the Portfolio writes an option, the premium received by the Portfolio is
recorded as a liability and is subsequently adjusted to the current market
value of the option written. Premiums received from 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's selling or buying a
security or currency at a price different from the current market value.
For the six months ended June 30, 2006, the Portfolio had no transactions in
written options.
14
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
Each class consists of 500,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
SHARES AMOUNT
------------------------------------ ------------------------------------
SIX MONTHS ENDED MAY 2, 2005(a) TO SIX MONTHS ENDED MAY 2, 2005(a) TO
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
---------------- ----------------- ---------------- -----------------
CLASS A
Shares sold -0- 10,000 $ 9 $ 100,000
Shares issued in reinvestment of
distributions 169 -0- 2,040 -0-
------- ------- ----------- -----------
Net increase 169 10,000 $ 2,049 $ 100,000
======= ======= =========== ===========
CLASS B
Shares sold 176,929 584,843 $ 2,262,270 $ 5,980,435
Shares issued in reinvestment of
distributions 12,384 -0- 149,106 -0-
Shares redeemed (23,185) (503) (285,421) (5,821)
------- ------- ----------- -----------
Net increase 166,128 584,340 $ 2,125,955 $ 5,974,614
======= ======= =========== ===========
(a) Commencement of operations.
NOTE F: RISKS INVOLVED IN INVESTING IN THE PORTFOLIO
Concentration of Risk--Investing in securities of foreign companies or foreign
governments involves special risks which include changes in foreign exchange
rates and the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies or foreign governments and their markets may be less
liquid and their prices more volatile than those of comparable U.S. companies
or of the U.S. government.
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.
NOTE G: JOINT CREDIT FACILITY
A number of open-end mutual funds managed by the Adviser, including the
Portfolio, participate in a $250 million revolving credit facility (the
"Facility") intended to provide short-term financing, if necessary, subject to
certain restrictions in connection with abnormal redemption activity.
Commitment fees related to the Facility are paid by the participating funds and
are included in the miscellaneous expenses in the statement of operations. The
Portfolio did not utilize the Facility during the six months ended June 30,
2006.
NOTE H: COMPONENTS OF ACCUMULATED EARNINGS (DEFICIT)
The tax character of distributions to be paid for the year ending December 31,
2006 will be determined at the end of the current fiscal year. As of December
31, 2005, the components of accumulated earnings/(deficit) on a tax basis were
as follows:
UNDISTRIBUTED ORDINARY INCOME $ 150,195
Accumulated capital and other losses (1,536)(a)
Unrealized appreciation/(depreciation) 961,216(b)
-----------
Total accumulated earnings/(deficit) $ 1,109,875
===========
(a) Net capital losses incurred after October 31, and within the taxable year
are deemed to arise on the first business day of the Portfolio's next taxable
year. For the year ended December 31, 2005, the Portfolio deferred until
January 1, 2006, post-October capital losses of $1,536.
(b) The difference between book basis and tax basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
15
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
NOTE I: LEGAL PROCEEDINGS
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds until December
31, 2008; and
(iii) The Adviser agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order and the NYAG Order
contemplate that the Adviser's registered investment company clients, including
the Fund, will introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee with respect to certain AllianceBernstein funds, including certain of the
Fund's portfolios. On September 7, 2004, the Fund's investment advisory
agreement was amended to reflect the reduced advisory fee for those portfolios.
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser
16
_______________________________________________________________________________
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
either were voluntarily dismissed or removed to federal court. On February 20,
2004, the Judicial Panel on Multidistrict Litigation transferred all actions to
the United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order. The claims in the mutual fund derivative consolidated
amended complaint are generally based on the theory that all fund advisory
agreements, distribution agreements and 12b-1 plans between the Adviser and the
AllianceBernstein Funds should be invalidated, regardless of whether market
timing occurred in each individual fund, because each was approved by fund
trustees on the basis of materially misleading information with respect to the
level of market timing permitted in funds managed by the Adviser. The claims
asserted in the other three consolidated amended complaints are similar to
those that the respective plaintiffs asserted in their previous federal
lawsuits. All of these lawsuits seek an unspecified amount of damages.
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the deputy commissioner of securities of the West Virginia
Securities Commissioner signed a Summary Order to Cease and Desist, and Notice
of Right to Hearing addressed to the Adviser and Alliance Holding. The Summary
Order claims that the Adviser and Alliance Holding violated the West Virginia
Uniform Securities Act, and makes factual allegations generally similar to
those in the Commission Order and the NYAGOrder. On January 26, 2006, the
Adviser, Alliance Holding, and various unaffiliated defendants filed a Petition
for Writ of Prohibition and Order Suspending Proceedings in West Virginia state
court seeking to vacate the Summary Order and for other relief. On April 12,
2006, respondents' petition was denied. On May 4, 2006, respondents appealed
the court's determination.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their
17
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
contracts with the Adviser, including recovery of all fees paid to the Adviser
pursuant to such contracts, an accounting of all fund-related fees, commissions
and soft dollar payments, and restitution of all unlawfully or discriminatorily
obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an adverse effect on the investment performance of the
AllianceBernstein Mutual Funds. However, the Adviser believes that these
matters are not likely to have a material adverse effect on its ability to
perform advisory services relating to the AllianceBernstein Mutual Funds.
18
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GLOBAL RESEARCH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS A
----------------------
SIX MONTHS MAY 2,
ENDED 2005(a)
JUNE 30, TO
2006 DECEMBER 31,
(UNAUDITED) 2005
----------------------
Net asset value, beginning of period $ 12.11 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .05 .01
Net realized and unrealized gain on investment and
foreign currency transactions .38 2.10
Net increase in net asset value from operations .43 2.11
LESS: DISTRIBUTIONS
Distributions from net realized gain on investment
and foreign currency transactions (.20) -0-
Net asset value, end of period $ 12.34 $ 12.11
TOTAL RETURN
TOTAL INVESTMENT RETURN BASED ON NET ASSET VALUE (d) 3.62% 21.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $125 $121
Ratio to average net assets of:
Expenses, net of waivers and reimbursements (e) 1.20%(f) 1.20%
Expenses, before waivers and reimbursements (e) 5.27%(f) 7.47%
Net investment income (c)(e) .79%(f) .13%
Portfolio turnover rate 39% 43%
See footnote summary on page 20.
19
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS (continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
CLASS B
----------------------
SIX MONTHS MAY 2,
ENDED 2005(a)
JUNE 30, TO
2006 DECEMBER 31,
(UNAUDITED) 2005
----------------------
Net asset value, beginning of period $ 12.09 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b)(c) .04 (.01)
Net realized and unrealized gain on investment and
foreign currency transactions .37 2.10
NET INCREASE IN NET ASSET VALUE FROM OPERATIONS .41 2.09
LESS: DISTRIBUTIONS
Distributions from net realized gain on investment and
foreign currency transactions (.20) -0-
Net asset value, end of period $ 12.30 $ 12.09
TOTAL RETURN
TOTAL INVESTMENT RETURN BASED ON NET ASSET VALUE (d) 3.46% 20.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $9,232 $7,063
Ratio to average net assets of:
Expenses, net of waivers and reimbursements (e) 1.45%(f) 1.45%
Expenses, before waivers and reimbursements (e) 5.50%(f) 7.73%
Net investment income (loss) (c)(e) .59%(f) (.14)%
Portfolio turnover rate 39% 43%
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived and reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Total return does not reflect the
deduction 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) Annualized.
(f) The ratio includes expenses attributable to estimated costs of proxy
solicitation.
20
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the investment advisory
agreement between Alliance Capital Management L.P. (the "Adviser") and
AllianceBernstein Variable Products Series Fund, Inc. on behalf of
AllianceBernstein Global Research Growth Portfolio(2) (the "Fund"), prepared by
Philip L. Kirstein, the Senior Officer, for the independent directors of the
Fund, as required by an August 2004 agreement between the Adviser and the New
York State Attorney General. The Senior Officer's evaluation of the investment
advisory agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees which was
provided to the independent directors in connection with their review of the
proposed continuance of the investment advisory agreement. The Senior Officer's
evaluation considered the following factors:
1. Management fees charged to institutional and other clients of the
Adviser for like services.
2. Management fees charged by other mutual fund companies for like
services.
3. Costs to the Adviser and its affiliates of supplying services
pursuant to the advisory agreement, excluding any intra-corporate
profit.
4. Profit margins of the Adviser and its affiliates from supplying
such services.
5. Possible economies of scale as the Fund grows larger.
6. Nature and quality of the Adviser's services including the
performance of the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The table below describes the Fund's advisory fees pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the New York State Attorney
General in December 2003 is based on a master schedule that contemplates eight
categories of Funds with almost all Funds in each category having the same
advisory fee schedule.(3)
ADVISORY FEE
BASED ON % OF AVERAGE
CATEGORY DAILY NET ASSETS FUND
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International 75 bp on 1st $2.5 billion Global Research Growth Portfolio
65 bp on next $2.5 billion
60 bp on the balance
The Adviser agreed to waive that portion of its management fees and/or
reimburse a portion of the Fund's total operating expenses to the degree
necessary to limit the Fund's expenses to the amounts set forth below during
the Fund's first fiscal year. The waiver is terminable by the Adviser on May
1st of each year upon at least 60 days written notice.
EXPENSE CAP PURSUANT TO
EXPENSE LIMITATION
FUND UNDERTAKING FISCAL YEAR END
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Global Research Growth Class A 1.20% December 31
Portfolio Class B 1.45%
(1) It should be noted that the information in the fee summary was completed
on December 7, 2005 and presented to the Board of Directors on December 14,
2005 in accordance with the Assurance of Discontinuance between the New York
State Attorney General and the Adviser. It also should be noted that references
in the fee summary pertaining to performance and expense ratios refer to Class
A shares of the Fund.
(2) The Fund commenced operations on May 2, 2005.
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the New York State Attorney
General.
21
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GLOBAL RESEARCH GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Funds' third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance requirements for the Fund are more costly
than those for institutional assets due to the greater complexities and time
required for investment companies, although as previously noted, a portion of
these expenses are reimbursed by the Fund to the Adviser. In addition, managing
the cash flow of an investment company may be more difficult than that of a
stable pool of assets, such as an institutional account with little cash
movement in either direction, particularly, if the Fund is in net redemption
and the Adviser is frequently forced to sell securities to raise cash for
redemptions. However, managing a Fund with positive cash flow may be easier at
times than managing a stable pool of assets. Finally, in recent years,
investment advisers have been sued by institutional clients and have suffered
reputational damage both by the attendant publicity and outcomes other than
complete victories. Accordingly, the legal and reputational risks associated
with institutional accounts are greater than previously thought, although still
not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. In addition to the Alliance institutional fee
schedule, set forth below are what would have been the effective advisory fee
of the Fund if the Alliance institutional fee schedule were applied to the Fund.
NET ASSETS EFFECTIVE ALLIANCE
09/30/05 ALLIANCE INSTITUTIONAL INSTITUTIONAL
FUND ($MIL) FEE SCHEDULE ADVISORY FEE
- -------------------------------------------------------------------------------
Global Research $6.2 Global Research Growth 0.800%
Growth Portfolio Schedule
80 bp on 1st $25m
65 bp on next $25m
55 bp on next $50m
45 bp on next $100m
40 bp on the balance
minimum account size $50m
The other AllianceBernstein Mutual Funds, which the Adviser manages, were also
affected by the Adviser's settlement with the New York State Attorney General.
Accordingly, another AllianceBernstein Mutual Fund that has the same investment
objective and policies as the Fund has the same advisory fee schedule as the
Fund.
The Adviser also manages and sponsors retail mutual funds which are organized
in jurisdictions outside the United States, generally Luxembourg, and sold to
non-United States resident investors. None of these off-shore funds have
breakpoints in the advisory fee schedule. Set forth below is the fee that the
Adviser charges to an offshore mutual fund with a similar investment style as
the Fund:
ASSET CLASS FEE(4)
- -------------------------------------------------------------------------------
Global Growth 1.00%
(4) The fee charged to the fund includes a 0.10% fee for administrative
services provided by the Adviser or its affiliates.
22
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AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
The Alliance Capital Investment Trust Management mutual funds ("ACITM"), which
are offered to investors in Japan, have an "all-in" fee without breakpoints in
its fee schedule to compensate the Adviser for investment advisory as well as
fund accounting and administration related services. The fee schedule of the
ACITM mutual fund with a similar investment style as the Fund is as follows:
FUND ACITM MUTUAL FUND(5) FEE
- -------------------------------------------------------------------------------
Global Research Growth Alliance Global Research 0.30%
Portfolio Growth (Sumitomo)(6)
The Adviser represented that it does not sub-advise any registered investment
companies with a similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Since the Fund has been operating for less than a year, it is difficult to
reasonably assess the Fund's management fees and total expenses in comparison
to its peers. As a result, no comparative analysis(7) was provided by Lipper,
Inc.(8) As noted above, the Fund has the same fee schedule as another
AllianceBernstein Mutual Fund advised by the Adviser. The other
AllianceBernstein Mutual Fund is in a different Lipper category than the Fund,
but the fee evaluation prepared to it noted that it had the lowest advisory fee
rate in its Peer Group.(9)
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
Members of the Adviser's Controller's Office presented to the Board of
Directors the Adviser's revenue and expenses associated with providing services
to the Fund. The presentation included an update on the Adviser's work with an
independent consultant to align the Adviser's two profitability systems. The
alignment, which now is complete, produces profitability information at the
Fund level which reflects the Adviser's management reporting approach. See
discussion below in Section IV.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
Since the Fund commenced operations on May 2, 2005, no 2004 calendar year
profitability information of the Adviser is available for the Fund.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated that they should be factored into the evaluation of the total
relationship between the Fund and the Adviser. Neither case law nor common
business practice precludes the Adviser's affiliates from earning a reasonable
profit on this type of relationship. These affiliates provide transfer agent,
distribution, and brokerage related services to the Fund and receive transfer
agent fees, Rule 12b-1 payments and commissions for providing brokerage
services. In addition, the Adviser benefits from soft dollar arrangements which
offset expenses the Adviser would otherwise incur. Additional information
regarding distribution related fees can be found in the prospectus of the Fund.
(5) The name in parenthesis is the distributor of the fund.
(6) The ACITM fund is not a retail fund.
(7) Hypothetically, if the Fund had been operating for at least a year,
Lipper's comparative analysis would have included the Fund's ranking with
respect to the proposed management fee relative to the Lipper group median at
the approximate current asset level of the Fund. In addition, Lipper would have
analyzed the total expense ratio of the Fund in comparison to its Lipper
Expense Group and Lipper Expense Universe. Lipper describes a Lipper Expense
Group as a representative sample of comparable funds and a Lipper Expense
Universe as a broader group, consisting of all funds in the same investment
classification/objections with a similar load type as the subject Fund.
(8) Lipper, Inc. is an analytical service provider that is not affiliated with
the Adviser.
(9) The Fund is compared to other variable products of the same investment
classification/objective while the other AllianceBernstein Mutual Fund is
compared to other non-variable products of the same of the same investment
classification/objective.
23
_______________________________________________________________________________
GLOBAL RESEARCH GROWTH PORTFOLIO
SENIOR OFFICER FEE EVALUATION
(continued)
AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
Financial intermediaries market and sell shares of the Fund and typically
receive compensation from ABIRM, the Adviser and/or the Fund for selling shares
of the Fund. Payments related to providing contract-holder record keeping
and/or administrative services will generally not exceed 0.35% of the average
daily net assets of the Fund attributable to the firm over the year.
The transfer agent of the Fund is Alliance Global Investor Services, Inc.
("AGIS"), an affiliate of the Adviser.(10) AGIS' after-tax profitability
decreased in 2004 in comparison to 2003.
The Fund may effect brokerage transactions through and pay commissions to the
Adviser's affiliate, Sanford C. Bernstein & Co. LLC, and/or its U.K. based
affiliate, Sanford C. Bernstein Ltd., (collectively "SCB"). The Adviser
represented that SCB's profitability from any future transaction conducted with
the Fund would be comparable to the profitability of SCB's dealings with other
similar third party clients. In the ordinary course of business, SCB receives
and pays liquidity rebates from electronic communications networks ("ECNs")
derived from trading for its clients, including the Fund. These credits and
charges are not being passed on to any SCB client.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent the Fund's assets exceed the
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $550 billion as of October 31, 2005, the
Adviser has the investment experience to manage and provide non-investment
services (described in Section II) to the Fund.
Set forth below are the since inception performance returns of the Fund (in
bold)(11) and its benchmarks. It should be noted that although the performance
return of the Fund is higher than its benchmarks, the Fund has been in
existence for less than a year.(12)
PERIODS ENDING SEPTEMBER 30, 2005
CUMULATIVE PERFORMANCE
FUND SINCE INCEPTION
- -------------------------------------------------------------------------------
GLOBAL RESEARCH GROWTH PORTFOLIO 16.20
MSCI World Growth Index (Net) 7.89
MSCI World Index (Net) 7.91
(10) It should be noted that the insurance companies to which the Fund is
linked provide additional shareholder services, including record keeping,
administration and customer service for contract holders.
(11) The performance returns are for the Class A shares of the Fund.
(12) The Fund commenced operations on May 2, 2005.
24
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AllianceBernstein Variable Products Series Fund
_______________________________________________________________________________
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: January 13, 2006
25
ITEM 2. CODE OF ETHICS.
Not applicable when filing a semi-annual report to shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable when filing a semi-annual report to shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable when filing a semi-annual report to shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(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 changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
12 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Variable Products Series Fund, Inc.
By: /s/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: August 18, 2006
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/ Marc O. Mayer
-----------------
Marc O. Mayer
President
Date: August 18, 2006
By: /s/ Joseph J. Mantineo
----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: August 18, 2006